Verizon has announced that it’s selling Yahoo and AOL after just five years of ownership. The deal is worth $5 billion and is expected to be finalized in the coming weeks. The deal will also see AOL and Yahoo combined into one single entity that will be known as simply Yahoo moving forward. The new owners will be Apollo Global Management, a private equity firm in the US.
The deal will see Apollo purchase additional subsidiaries under the Yahoo name including websites like TechCrunch, Yahoo Finance, and also Engadget. According to David Sambur, a senior partner at Apollo, the private equity firm sees immense "growth prospects for Yahoo" adding that it believes the future is indeed looking good.
Verizon started by purchasing AOL in 2015 in a deal that was reportedly worth $4.4 billion. A year later, the giant announced a deal to buy Yahoo for $4.3 billion. The sale of both companies at just $5 billion today means that Verizon will be making losses of nearly 50%. Despite this, Verizon has already sold other entities that once belonged to Yahoo separately. For example, it sold the Huffington Post last year.
Ever since Verizon took over Yahoo and AOL, it has struggled to turn both entities to any profitability. In fact, in 2018, the company reported losses totaling nearly $5 billion. The sale of Yahoo and AOL also means that Verizon will not officially exit the media business. Yes, the telecoms giant still holds a few minority stakes in several media companies, but Yahoo and AOL were its biggest bets.
It is now obvious that things have not worked out as expected. Yahoo has, however, struggled to really make a huge mark in its space. The company has been on a downward spiral and there aren't many people that believe it will turn the corner anytime soon. We are also not sure what Apollo intends to do with the business.
Yahoo still has a few promising entities in the media space and has done very well to consolidate its dominance in these areas. But even with all these efforts, turning a profit has proven very hard for the company which was at some point one of the most promising tech startups in the US. It will be interesting to see how Apollo will approach things.
After all, a private equity firm is different from a large telecoms company. There could be a few drastic changes in how Yahoo is run and the future it will be heading towards. But the key question remains whether the company will be sustainable enough over the coming years.
Apollo seems to think so and there are of course some growth opportunities. We will have to wait and see how it all plays out. Both Verizon and Apollo are confident that the deal will be finalized in the second half of the year.
