Yahoo / Verizon: price and remaining risk

What changed in the agreement

The February 2017 amendment reduced the base price by approximately 7.25%. That percentage describes this agreement; it is not a valuation rule for another business. Yahoo 2016 Form 10-K.

The SEC subsequently found that Yahoo had not disclosed a significant data breach during the original due diligence, and that Verizon renegotiated after disclosure. These are findings in a regulatory settlement accepted without admitting or denying them. SEC order, 24 April 2018, part II and paragraphs 4 and 10.

The amended terms left Yahoo responsible for half of specified cash liabilities arising after closing from non-SEC government investigations and third-party litigation related to the breaches. Shareholder lawsuits and SEC investigations remained Yahoo's responsibility. Joint announcement, 21 February 2017, p. 2.

The implications for a review are distinct: an initial response is not proof of complete disclosure; the commercial effect of a finding needs to be identified; and a new price does not make the underlying exposure disappear. The agreed treatment of that exposure has to be understood separately.

From a finding to a decision

Consider a smaller acquisition whose forecast depends on retaining its largest customer. This is our methodological example, not a further finding about Yahoo. The team should distinguish historical sales from the assumption that those sales will continue, then identify which document or confirmation supports that assumption.

If the evidence is missing, the buyer needs to see which part of the forecast remains unsupported and whether it is prepared to submit an offer on that basis. An unquantified cost remains unknown. It should not silently become zero in a model.

Every row needs a specific document reference, its date, verification status and a deadline for the missing evidence. Legal interpretation and the drafting of contractual protection remain with the responsible legal adviser.

A handover the buyer can act on

A concise decision record connects the management assertion, evidence found, remaining question, affected financial assumption and requested next action. It also names who is to resolve each open item. The team can review it before making an offer and update it when further documents arrive.

Within an agreed scope, ORIGINATION can review available financial and commercial materials, reconcile them with management statements and prepare that record. Technical, legal and cyber conclusions require the appropriate specialist and separately agreed responsibility. The output supports a concrete decision: proceed, obtain more evidence, revise the offer or defer the decision.

Calculation and limits

(4,825.8 − 4,475.8) ÷ 4,825.8 × 100 = 7.25268%.

One historical transaction is not a statistical sample. The sources document the renegotiation; they do not establish the general return on due diligence. Adviser costs, final price adjustments and the value of retained liabilities have not been quantified here. We therefore make no calculation of net savings, service ROI or a break-even fee. The smaller-company examples are our method illustration, separate from the historical record.