Magneto

Rule
Magneto Rule Workout
Corporate Law
Author: Pedro Quintero Igeo
Internship company: Airbus Helicopters Espaa

This document develops the answers to the questions about Corporate Law which were proposed
as work for the Magneto Rule Module.

Pedro Quintero Igeo

Magneto
Rule
Microsoft perspective

A. Do you think that Microsoft will eventually acquire Yahoo on the current
terms? Justify your answer considering all of the issues, such as stock market
value, shareholders fiduciary duties, key employees and defensive strategies.
Well, Yahoo will have to accept the current terms of the acquisition offer we made
them because both parties will have a profit due to the acquisition. Mainly, one should
have into account that the economic offer we made is about $44.6 billion. The last price
of Yahoo was around $27 billion, i.e., we are offering to the owners of Yahoo an
increment of more than a 60% of the current value of their possessions.
It have been seen during last years that, Yahoo itself is not a real competition for its
main rival, Google. Google is nearly monopolizing its market and it is necessary to
create an important synergy and scale economics in order to can face them.
Also, it is necessary to have into account that Yahoo is not passing through its best
moment (in part due to which was explained in the second paragraph). An important
employment restructuration was recently announced, so, a good result of our current
negotiation will can also save the job of a very significant amount of people.
So, in conclusion, we think Yahoo! will accept the offer, because it will lead to a great
profit to their selves and to Microsoft, but also it will benefit to the employees and the
shareholders. Also it gives a great strength for both brands in the markets.

Pedro Quintero Igeo

Magneto
Rule
Yahoo perspective

B. Do you think that one of Yahoos competitors will try to block this merger
through litigation and/or regulatory battles? Think about AOL or Google.
From the point of view of Google, it is obvious that the agreement between us and
Microsoft is highly harmful. Nowadays they practically monopolize the market and a
great agreement between its only important competitor and a giant like Microsoft will
steal them and important part of the market and with the time it will be even possible
Google will pass to a second place.
However we do not think they will try to block the result of the current negotiation
because we always had in mind the current laws of monopoly and we are pretty sure we
are complying with any legal requirement, so, litigation will only harm the competence.
From the point of view of AOL or other little companies it is very probable they will not
be able to compete against us (Microsoft and Yahoo!) and Google at the same time. So,
in the future they will finally disappear or merge with bigger companies with bigger
capitals.
However, due to their little legal resources they will not be able to block the merger
mainly, because, in a case of a litigation about anti-monopoly laws they will not only to
litigate against us, but also against the own Google (because, in the case anyone thought
we to are against anti-monopoly laws, the same could be said about Google).
So, in conclusion, it is not expected any external agent will block the merge.

Pedro Quintero Igeo

Magneto
Rule
C. Once you have analysed the situation from different perspectives, make a
minimum of 2 recommendations for each of these firms about how to proceed in
the future with respect to the takeover.
C.1. Recommendations to Microsoft
1. First of all, I would recommend Microsoft to take fast actions, in order to not let the
competence time enough to react and, after de merge is done, to be able to take an
important part of the market before anyone can take any action. Also, if the agreement
is not developed fast enough Microsoft have to have into account the next fact: They are
about to buy a company which is losing its value very quick so, if actions are not taken
fast the result of the negotiation will lead to a very important failure.

2. Other recommendation I would give to Microsoft is not to underestimate the actions

that Google could do in order to avoid the merge. Although they do not have too many
possibilities they are becoming on a quite powerful company, so its resources cannot be
underestimate.
C.2. Recommendations to Yahoo!
1. The first recommendation is the same which were given to Microsoft: If they really
think this agreement is profitable for them they mustnt permit any kind of delay around
the negotiations.
2. Also, they always will have to have in mind that the competence (Google) could be
able to make them any kind of agreement (this agreement probably would not include a
merge, because it would led to break the anti-monopoly laws). In this case a very deep
study would have to be done in order to take the most profitable decision.

Pedro Quintero Igeo