A merger between AOL Time Warner and Yahoo! looks increasingly likely as it was announced that the two companies are in due diligence, a process through which companies pass when in potential acquisition negotiations.
Reports that the two companies were in talks surfaced several months ago as the search engine looked for a way survive in the market without accepting Microsoft's takeover bid. Earlier this year, Yahoo! repeatedly rejected Microsoft's advances before it finally withdrew its takeover proposal. Talks with AOL have been on and off for most of the year, but now it looks as if meaningful progress has been made.
The current talks are focussed on integrating AOL's content and advertising business into Yahoo!'s operations, in which Time Warner would have a stake. Concerns over integration are thought to centre on choosing whether to keep separate portals and e-mail services, and cost savings that could be made by reducing duplication.
Shares in both companies have dropped over 2008 - Time Warner is down by about 45 per cent and Yahoo! by around 63 per cent - and the current due diligence stage will help both companies assess the ways in which a merger would affect their shares and future profits.
AOL has recently made changes to its homepage - for instance, allowing users to access Yahoo! e-mail from AOL.com - becoming the first high profile portal to give space to its competitors. Access to social networking sites were also incorporated, including the first real integration of Bebo on its homepage since AOL's acquisition of the social site earlier in the year. As a result, traffic to AOL.com has risen by 14 per cent.
Although discussions are ongoing between AOL and Yahoo!, it is thought that a deal is far from imminent and neither side has yet made an official statement on the reports.
