Assessing The Regulatory Role In a Microsoft Takeover Attempt of Yahoo

February 1, 2008

An attempted takeover of Yahoo! by Microsoft, as our own Rich Tehrani notes that Microsoft announced its intention to do so today, would definitely prompt extensive regulatory review by several U.S. Government agencies.

The Securities and Exchange Commission, which reviews merger-related financial dealings, would certainly want to chew into this one. So would the Federal Trade Commission and the FCC.

Some of these hearings could be at the request of Google, the success of which is probably prompting Microsoft's urge to get this merger underway as well.

But not so fast. The regulatory role will take months, if not years, to play out.

Yet even before any merger is formally approved by Yahoo! shareholders, I would expect court fights from disaffected Yahoo! shareholders. Why? Because- especially with a merger of this size- not everyone on the acquired side is ever happy. Some shareholders will have settled for more, while others just don't like the sound or smell of any deal that has been made.

A huge unknown here will be how the timing of how this merger's consideration by U.S. regulatory agencies will be impacted by this year' U.S. Presidential elections. A Democrat win this November would shift control of the U.S. Government's executive branch from a party traditionally opposed to extensive regulation to one that is not so opposed.

If there is a party shift, precadent teaches us that across most U.S. Federal agencies, Commissioners who had been appointed by the President from the party that is losing power often leave for the greener private sector.

Not that the balance of power at the Presidentially appointed regulatory agencies would immediately change, but if merger consideration goes on and on to the point where a Commissioner or two's term runs out or they decide to retire, that would add an extra note of complexity to Microsoft-Yahoo hearings.

Anyhow, this story is going to be with us for awhile.