Yahoo M&A Math: 4 Core Assets + 1 Real Media Strategy

All eyes are on Yahoo! Who wants to buy the company? And why?

Here's some simple math to make sense of it all (and which may guide you to the right answer):

I. Yahoo's Core (& Under-Appreciated) Assets:

(1) Its Brand -- everyone knows Yahoo, worldwide ... that's power (in the right hands);

(2) Its Massive Base -- let's not forget how big Yahoo really is ... because it is (world's 5th most visited website according to Alexa -- which is much bigger than AOL, and AOL got $4.4 billion);

(3) Its Content -- Yahoo still creates compelling content (finance, lifestyle, news and sports are its strengths); but it doesn't make enough of the "right" content (video), it doesn't sufficiently focus on the right platform (mobile), and it never developed a coherent content strategy (vision).  Without clarity and vision, teams cannot succeed (and Yahoo didn't ... but it can ...) (more on that below); and

(4) Its Sales Force -- AOL has programmatic strength; Yahoo has a powerful human sales force that did the best it could amidst the non-clarity and chaos.

II. The Right Strategy - Media:

Don't underestimate the power of those ingredients above. Because they are potent. In the right hands, of course. Make no mistake, Yahoo had the potential to transform itself into being a leading digital-first media company (with the higher enterprise valuations that go with it) -- which means mobile-first, video-first content targeting the demographics that marketers love (i.e., the young). But, the opportunity was lost. More like fumbled. No coherent strategy. No execution. Just jumbled moves (Katie Couric, Community, NFL streaming rights for one game ... from London) and revolving doors (several executives who came and went confided in me about their empty promises of empowerment amidst the management layer-cake). In the meantime -- and while Yahoo flailed -- Facebook, Snapchat and others boldly acted and evolved into digital media leaders (and real YouTube challengers).

A buyer with real media vision and real media talent -- and with a commitment to employee empowerment and morale -- could still make a "go" of it and bring Yahoo back to a position of leadership if it were to act boldly and swiftly.

That's when M&A magic happens. When management layers are stripped away. When vision, focus, empowerment and morale happen. That's when money again pours down. And, enterprise value goes up.

In other words, that's transformation time.

Really quite simple, isn't it? (Well, perhaps not simple ... but, the basic recipe for success isn't so hard either ... although Yahoo made it look that way).

III. So, Who Sees The Potential & Will Buy Yahoo?

(1) Most believe Verizon is most likely. And, that makes a lot of sense. Verizon has already demonstrated the "will" (buying AOL for $4.4 billion). And, Yahoo is a lot like AOL in terms of its DNA. Combining those assets, Verizon could significantly reduce redundancies (which, sadly, means significant jobs lost). Verizon would achieve massive content and media scale with a combined Yahoo and AOL -- scale which a sales force could translate effectively into mega-bucks -- especially in our millennial and mobile-first world.

(2) The Daily Mail or other international players? Yes, it could happen -- you've heard the rumors. An international player -- particularly a non-digital one like The Daily Mail -- could immediately achieve global/U.S. scale and power. And transform itself into being digital first in the process ...

(3) Old Guard Media Companies. Those that haven't yet seen the digital-first "light" could -- in one bold move -- make a digital-first statement that has real substance behind it. BUT, they would need the right digital-first experience and expertise to reach the promised land. Old guard executives cannot do it alone.

(4) Private Equity. These firms' raison d'etre is to find undervalued assets -- cut costs -- turn around -- and sell again -- at a massive premium. And, private equity is increasingly focused on content-first assets (like Yahoo). Makes a lot of sense here. That's why rumors of The Daily Mail working with private equity should not be dismissed outright. But that is only one possible PE-focused scenario.

Whoever it is, someone will buy Yahoo this time around. Its auction was simply too broad not to close a deal this time. For Yahoo that means it needs to create a multiple buyer scenario -- just like we all want to do when we sell our houses. Multiple offers drive up prices. And remember -- and this is key -- a significant motivator for M&A is also to keep an asset out of the hands of a competitor. A purely defensive play.

On the other hand, if only one bidder moves forward, numbers will fall back down to earth. Significantly.

What happens if Yahoo receives no bids? How does Yahoo's board deal with a worst case scenario?

Yahoo simply can't allow that to happen. Morale is simply too low at this point. New blood is needed. With new vision. And with a real authentic belief in -- and strategy for -- the possibilities.

Because Yahoo has them ....