Honors Theses

LBO’s & Strategic M&A: Financial Analysis of Yahoo!, inc. in 2008

Date of Award

Spring 5-7-2022

Document Type

Undergraduate Thesis

Department

Finance

First Advisor

Bonnie Van Ness

Second Advisor

Mark Walker

Third Advisor

Arup Ganguly

Relational Format

Dissertation/Thesis

Abstract

As a Finance major at the University of Mississippi, I have had the opportunity to learn about a variety of different aspects of corporate finance. This ultimately led to me pursuing a career in the field of investment banking. I came into my senior year not knowing what to expect out of my senior thesis project, but I did know that I wanted to further develop my financial modeling and analysis skillset through the project. This eventually led to meeting with Professor Ganguly, who is an ex-investment banker himself, in which he proposed that I perform an analysis of Microsoft’s potential acquisition of Yahoo in 2008, as well as examine the potential for a leveraged buyout of Yahoo in the same year. To properly analyze the potential synergistic relationships and accretion or dilution of shareholder value in a strategic acquisition of Yahoo by Microsoft, I needed to design and develop an extensive merger model in excel. This financial model allowed me to accurately forecast the effects of the acquisition on Microsoft’s shareholders. Through the use of accretion dilution analysis and merger integration I was able to reach the conclusion that an acquisition of Yahoo by Microsoft in 2008 would have been accretive to Microsoft shareholders and therefore would have been a good decision. To adequately examine the potential of a leveraged buyout of Yahoo in 2008, I created a Leveraged Buyout Model using historical leverage data and LIBOR spreads to determine that a financial sponsor could achieve a desirable Internal Rate of Return on the leveraged buyout.

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