Microsoft Smells Blood in Yahoo Water (MSFT/YHOO)
If Yahoo won't sell out to you, then just hire their people—or so Microsoft seems to be thinking. Below, a note received by a promising job candidate: — Hi [Talented Yahoo Employee], — I am a member of Microsoft's marketing staffing team.
Context & Ripple Effects
Microsoft's pursuit of Yahoo has been building in public since at least May 2007, when the New York Times reported the first round of deal rumors, followed by Silicon Alley Insider's November 2007 take on how a Microsoft-Yahoo combination could actually be structured. What changed this week: per the relationships on record, the sale itself has failed to materialize — and Microsoft's marketing staffing team is now contacting promising Yahoo candidates directly, converting an M&A pitch into a recruiting one.
First-order effects
- Yahoo employees become the contested asset: with the company unwilling to sell itself whole, Microsoft is bidding for its people piecemeal, starting with its own staffing outreach to candidates.
Second-order effects
- Jerry Yang faces the squeeze from both ends — alongside the rumored aggressive layoffs expected on this week's earnings call, he must now defend retention against an acquirer-turned-raider picking off staff without paying a control premium.
Third-order effects
- If the pattern holds, a rebuffed acquirer no longer walks away: it can strip the target's human capital through hiring, weakening the target's bargaining position for any future deal negotiation.
The trend: Corporate acquisitions are increasingly preceded or replaced by targeted talent raids when targets refuse to sell.