Yahoo Has Bought 41 Companies In Two Years: This Is How It Decides Who To Buy, What To Pay

Yahoo Jacqueline Reses

Fortune Brainstorm TECH

Yahoo's M&A and HR chief, Jacqueline Reses

At almost the very moment that Yahoo was reporting its disappointing quarterly earnings, and saying it would keep a bigger stake in the hot Chinese internet company Alibaba after its IPO than originally planned, the woman responsible for the Alibaba deal was on stage at the Fortune Brainstorm conference in Aspen, Colorado.

She was talking about her merger and acquisitions strategy. Jacqueline Reses is chief development officer for Yahoo and is also the head of Yahoo's HR department.
Reses joined in September 2012, shortly after CEO Marissa Mayer took the helm. Mayer lured her away from a career as a private equity investor for Apax Partners.

Reses is not a typical corporate mouthpiece. On stage she was funny and irreverent. At one point, when asked to give a yes/no answer on if she thought competitor AOL would be acquired in the next two years, without missing a beat she joked, "Not by us."

The room laughed and the line went viral on Twitter.

It says a lot about Yahoo's turnaround strategy to combine M&A with HR and hand both roles to a dealmaker. Reses has done an exhausting 41 transactions in the past two years, she says, and if the pace has slowed down recently, that's mostly because she's focused on the Alibaba IPO. She's a board member for Alibaba, and Yahoo owns roughly 24% of the company. It's expected to go public sometime this fall in a huge IPO. The Chinese e-commerce site is valued by investors at $200 billion.

Yahoo was supposed to have to sell 208 million Alibaba shares in the IPO. But Reses renegotiated so that Yahoo would sell 140 million shares, the company said on Tuesday. Keeping a larger stake of such a fast-growing company should be good for Yahoo's investors. Here's what she told Brainstorm attendees about her dealmaking:

She makes three kinds of acquisitions: talent, tech, and strategy. For an acqu-hire she looks at the "quality of the people." For a "tech" buy, she looks at how well the tech can integrate with Yahoo's existing tech. A strategy buy is considered "transformational," such as Yahoo's $1.1 billion purchase of Tumblr.

Except for a handful of big, publicly disclosed deals, all of the deals have been fairly small. "In the 10s and 20s," she said, referring to $10 million to $20 million. However, many of them are far smaller than that. From January-March, Yahoo bought five companies, and the total purchase price for these acquisitions was $23 million, it said.

Does that mean that Yahoo is low-balling its offers? Maybe.

"When we do a transaction, we make an offer. We care greatly about the success of team. If investors take the transaction, then they think the valuation is fair," she said.

The biggest factor in making an offer is if the culture and people are a good fit with Yahoo, she says.

Of the 41 deals, almost none of them involved some kind of bidding war nor did they involve investment bankers. Tumblr was an exception in that it did involve bankers. She didn't comment on whether a bidding war happened, but the presence of bankers usually indicates an effort to shop a company around for other offers. There was some speculation that Facebook was interested.
Yahoo starts measuring the "success" of the acquisition right away, she said, looking at the stuff you would expect: productivity of the people for an acqu-hire; how quickly the tech has been integrated to Yahoo's offerings for a tech buy; and looking at growth, revenue, and trajectories for a strategic buy.