Private equity takes two approaches to Yahoo: sources
(Reuters) - Private equity firms including KKR and TPG Capital are looking to potentially buy minority stakes of up to 20 percent in Yahoo Inc with an eye to eventually taking over the whole company, people with knowledge of the situation said.
Context & Ripple Effects
Private equity's courtship of Yahoo has been building all autumn: KKR and Blackstone were first reported weighing a full takeover in mid-October, followed days later by word that Google was mulling a bid alongside buyout firms — while Business Insider accused the firms of using the Wall Street Journal to talk Yahoo's price down. The new Reuters report adds a structural wrinkle: rather than one big check, KKR and TPG would start with minority stakes of up to 20 percent and keep the option to move to control later.
The staged approach lands in the middle of Yahoo's board-led strategic review, which Jerry Yang said at AsiaD includes options beyond a sale, and alongside a separate track in which Alibaba and Softbank are seeking partners for their own play. With Yahoo's Microsoft-AOL display advertising tie-up confirmed the same week, the board now has multiple bid structures to weigh against keeping the company intact.
First-order effects
- Yahoo's board gains a lower-commitment alternative to an outright sale: a 20 percent minority stake brings in buyout capital and pressure without forcing an immediate change of control during the ongoing strategic review.
- KKR and TPG secure optionality at reduced risk — they can underwrite Yahoo's core assets and Asian holdings before committing to a full take-private.
Second-order effects
- Alibaba and Softbank's partner search now competes directly for the same minority-stake slot, forcing the two camps to either align or bid against each other for influence over Yahoo's direction.
- Any bidder pursuing a full takeover — including the Google-linked group reported in October — must price against a structure that lets rivals accumulate position cheaply first, tightening the negotiation around Yahoo's valuation.
Third-order effects
- If the minority-first structure proves out, it becomes a template for private equity approaching other large-cap internet companies where a traditional leveraged buyout of the whole firm is too large or uncertain to underwrite in one step.
- The month-long pattern of sourced leaks about Yahoo bids points to press-driven price discovery becoming a standard feature of contested strategic reviews, with bidders using media positioning ahead of formal offers.
The trend: Large-cap internet targets are drawing private equity through staged minority positions that preserve a path to control, rather than single-shot leveraged buyouts.