When it comes to M&A security breaches can be costly in more ways than one. Yahoo!’s expectations of a smooth transition in the Verizon takeover have been scuppered with the news that the acquiring company was not prepared to offer the full asking price.
The timeline of the Yahoo! and Verizon takeover has certainly been colourful. The headlines began in 2014 with what was the biggest data breach in history where the details of 1.5 billion Yahoo! users was targeted by cyber-criminals. This was further compounded by revelations emerging of a further cyber-attack a year earlier where 500 million accounts were compromised. The sequence of events which followed – Yahoo!’s stock price falling and Verizon’s hesitation to proceed with the deal – have been well documented and resulted in the telecommunications company seeking to pay a reduced price for Yahoo! of reportedly at least $350 million less than was originally agreed.
There is little doubt that Yahoo! has suffered in terms of its reputation, its brand and even its customer base as a result of the cyber-attacks. However, it now seems that the California-based tech company will also undergo a significant financial hit. Verizon is apparently still willing to proceed with the Yahoo! acquisition but at a much-reduced price of around $4.48 billion for Yahoo!, which is substantially less than Microsoft’s 2008 bid of $44 billion.
It confirms Verizon’s willingness to absorb the data breach risks in order to expand into the lucrative digital market. The company bought AOL in 2015 for $4.4 billion in a bid to capitalise on its technology within the sphere of digital advertising, and Verizon now hopes to benefit from Yahoo!’s news, finance, entertainment and sports coverage, as well as the photo sharing site Flickr and micro blogging site Tumblr.
Under the terms of the new offer, Verizon and Yahoo! will be jointly responsible for any financial liabilities which can be linked to the data breaches and which may arise from both third-party litigation and government investigations. However, Yahoo! alone will be responsible for any liabilities which result from lawsuits from shareholders and any Securities and Exchange Commission (SEC) investigations into whether Yahoo! should have fully disclosed information it had on the hacking. There are around 23 class action lawsuits currently filed against Yahoo! for breach of privacy and non-disclosure of material facts to federal investigators.
The deal is expected to close in Q2 2017 and following this, Yahoo!’s remaining interests will be renamed Altaba Inc. This company will have a stake in the Alibaba Group – a Chinese e-commerce company – and Yahoo! Japan.
Head of Product at Verizon, Marni Walden, was pleased with the deal which has been struck and said: “The amended terms of the agreement provide a fair and favourable outcome for shareholders.” The stock market seemed to agree given the rise in stocks of both companies, after the amended announcement was made.
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