The Ins and Outs of a Potential Yahoo-AOL Merger

There was a time when a merger between Yahoo! Inc. (NASDAQ: YHOO) and AOL, Inc. (NYSE: AOL) would have inspired antitrust whispers.

The days when these two companies dominated the web are long gone, but could a merger between the two be the best path forward?

Activist hedge fund Starboard Value LP believes so, and it has been pushing the two companies to consider joining forces.

The State Of Affairs
There’s no question that Facebook Inc (NASDAQ: FB) and Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) have been — figuratively speaking — stealing AOL and Yahoo’s lunch money for years.

Both AOL and Yahoo have looked to new CEOs with proven track records to save the day. In 2009, AOL turned to former Google executive Tim Armstrong to stop the bleeding. AOL’s market cap has roughly doubled with Armstrong at the helm, as key acquisitions like automated video advertising company Adap.TV have kept AOL afloat.

Yahoo, on the other hand, turned to another former Google executive: Marissa Mayer. Since Mayer took over as CEO in 2012, Yahoo’s share price has more than tripled, but Mayer still has some harsh critics.

Yahoo has aggressively spent more than $1.3 billion on acquisitions under Mayer, including $1.1 billion for Tumblr. Unfortunately for Mayer, shareholders are not seeing much growth in Yahoo’s core advertising, web and email businesses as a result of the strategy.

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