Yahoo hack may cost the company the Verizon deal

Yahoo is jinxed, or so we’d like to believe. The once celebrated Internet giant, had been struggling for years. Hopes pinned on Marissa Mayer and her serial acquisition strategy also couldn’t save the Internet company. We all knew an acquisition was in the pipeline, and no one really cared as much. However, in the recent times there was some respite for the company in the form of the $4.8 billion Verizon deal. The company had been looking for a prospective buyer for a long time.

But looks like it’s woes just don’t seem to end. The  Yahoo hack that came to light last month may cause the company a lot more damage than what it had expected. The hack that compromised at least 500 million accounts took place back in 2014, and many eyebrows have been raised over why the delay in reporting the issue.  

Verizon has begun calling it a ‘material event’, which essentially means the company wouldn’t have offered the amount it did, had it known about the data breach earlier. It may also have probably not bid for Yahoo at all. And, this makes it even worse for Yahoo.

According to the Washington Post, Verizon General Counsel Craig Silliman said, “I think we have a reasonable basis to believe right now that impact is material. And we’re looking to Yahoo to demonstrate to us the full impact if they believe it’s not. They’ll need to show us that, but the process is in the works."

According to Cnet, a Verizon spokesman said “material” finding kills the acquisition, said “the statement stands on its own. Nothing more.” This clearly hints at a possibility of Verizon changing its mind. If this happens, the company may just lose its chance of getting whatever asking price it still can, or simply struggle finding a new buyer.

In worse case, there are chances that Verizon may renegotiate the price, and experts believe that Yahoo may have no other choice either. “I don’t think it has much of a choice. Who else would want to buy them?” Roger Entner, an analyst at Recon Analytics told Reuters.  

Some analysts suggested, as per Reuters, Verizon may be trying to get a better price. Roger Entner, an analyst at Recon Analytics, said “Verizon is rightfully upset about Yahoo not properly disclosing the breach.”

According to the report , the deal had a clause that says Verizon can withdraw if a new event “reasonably can be expected to have a material adverse effect on the business, assets, properties, results of operation or financial condition of the business.

Yahoo had also claimed that the cyber attack was carried out by a “state-sponsored” actor. However, some security experts have challenged Yahoo. Meanwhile, several democratic senators had pressed Yahoo to reveal more information about the hack and why it took so long to discover.

Meanwhile, experts also said that bidders who try to extract themselves from mergers using the material adverse clause face an uphill battle. There hasn’t been a US company that has invoked the clause successfully in court to walk out of a deal.