Searching for a Saviour: Apollo Buys Yahoo and AOL from Verizon​


By Curtley Bale​

The Story

US private equity firm Apollo has bought Yahoo, AOL and other media assets from Verizon, in a deal worth $5 billion. Verizon, one of America’s biggest telecommunications companies, is selling its whole media division to focus on its core phone networks business. Apollo is set to change the name of the division, which encompasses Yahoo and AOL, from ‘Oath’ to ‘Yahoo’ once the deal is completed (Reuters).

What It Means For Businesses And Law Firms

Yahoo and AOL have had a tough time over the past couple of decades. Despite being among the very first businesses on the internet, both brands suffered after the dot-com bubble crash in 2001. AOL’s doomed merger with TimeWarner is a well-known case study for students worldwide on the pitfalls of merging companies for financial reasons only, without giving sufficient consideration to the effect of merging distinct corporate cultures. Faith in Yahoo fell after the bubble burst, and it has since played second fiddle to Google, Facebook, and Amazon in terms of its online advertising and marketplace business.

Verizon spent $9 billion acquiring Yahoo and AOL, but may have struggled to incorporate the brands into its existing business model. The phone company failed to penetrate the social media market, selling brands such as Tumblr and HuffPost in the process, and also failed to compete with Facebook and Google in the online advertising market (Financial Times). Verizon’s acquisition of Yahoo and AOL failed to create the synergies expected, and has led to Verizon shifting control of the businesses (Verizon). As part of the deal, they will still retain a 10% stake in the newco.

The sale will allow Verizon to focus on the expensive 5G roll-out across America. The company has already issued bonds of around $31 billion to cover the expected $45 billion costs of 5G networks. This sale to Apollo will help bring in extra capital to service costs of the project, which are expected to be around $20 billion for 2021 (Bloomberg).

Apollo intends to invest and transform the new company, relying on the nostalgia behind the name Yahoo. Apollo wants to combine Yahoo’s successful sports site with the private equity firm’s expertise in online gambling and casino ownership, with the former being an increasingly lucrative market in the US. Verizon’s Oath division saw revenues of $7 billion in 2020, and $1.7 billion in Q1 2021. Apollo is also keen to monetise the popular Yahoo Finance, potentially turning it into an online trading platform to increase revenue (Apollo). Despite tough times, Apollo’s vision may well be realised, as Yahoo is still the fifth most popular website outside of China, with 90 million monthly users (Alexa).

Verizon is being advised on the deal by US heavyweights Kirkland & Ellis, and magic circle firm Freshfields. Goldman Sachs also provided financial advice on the deal. AOL was advised by Paul, Weiss, Rifkind, Wharton & Garrison, as well as a plethora of banks and capital markets experts, including Barclays, Deutsche Bank and RBC.

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