AOL continues looking into a Yahoo merger

Rumors that AOL was interested in purchasing Yahoo were reported here last month and it appears that AOL is now taking the next steps in investigating a possible merger; Reuters is reporting that they have hired Bank of America to “explore strategic options including a potential Yahoo Inc merger.

While still early on in the discovery phase, the fact that AOL would spend money to investigate this option is still very intriguing.  The current talks require Yahoo to spin off its stake in China’s Alibaba, something that Yahoo CEO Carol Bartz has stated she is against. The spin-off would generate roughly $11 billion, make Yahoo more affordable, and could increase the value of that part of the business.  It appears that some private equity firms have also talked to AOL about potential buyouts of Yahoo, but all of those talks are apparently stalled at this time.

The question that still remains is what value would either AOL or Yahoo receive from such a merger?  Both companies are currently relics of the early Internet days and neither has done a very good job reinventing themselves in recent years.  While both may compete against the likes of Facebook and Google, neither is winning the war.  Would a merger between the two breathe life into the combined company, or would it simply kill both companies in one fell swoop?  And more importantly, would anyone even notice?

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