MicroHoo: Lesson From A Takeover Attempt
On February 1, 2008, Microsoft offered $43.7 billion for Yahoo. This was a milestone in the Microsoft versus Google battle to control the internet search industry and the related online advertising market. The authors provide an in-depth analysis of this failed takeover attempt. They attempt to identify the sources of overbidding (signaling, hubris-overconfidence, rational overpayment) and they show that the corporate control market has a disciplinary dimension but of an incidental and latent nature. The results highlight the existence of takeover anticipation premiums in the stock prices of the potential targets.