According to the Wall Street Journal [a paid publication], it looks like the Yahoo! (NASDAQ: YHOO) board will reject Microsoft’s $31 buyout offer. Basically, the company wants at least $40 (hey, why not?).

So, now the ball’s in Microsoft’s (NASDAQ: MSFT) court. What to do? There are several options.

Of course, Microsoft can up its tender. But why? After all, who can really compete against Microsoft? In other words, why should Microsoft tender against itself?

The #2 option: go hostile. that means filing a tender offer and waging proxy fight. In other words, shareholders will be able to invent up their own minds. And, given that the Yahoo! shareholder base has changed significantly (that is, with lots of money-grubbing hedge funds), I think there will be lots of pressure to get a deal done.

True,

the hostile approach may be scary to Yahoo! employees. But, I have to assume they plus realize that Microsoft is going to intestine headcount besides.

In fact, I think a hostile approach can actually get to a negotiation — and perhaps a small boost in the offer.

Something else: speed is critical. With the election year, it’s not easy to predict who will be in the White House — and how a new regulatory regime may affect the antitrust implications of a Microsoft-Yahoo! combo.

Tom Taulli is the author of various books, including The total M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He plus operates DealProfiles.com.

Original post by Tom Taulli

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