On May 19, Yahoo announced was purchasing blogging service Tumblr for about $1.1 billion in cash. The deal, Yahoo CEO Marissa Mayer’s first major acquisition since she signed on in mid-2012, was designed to put a fresh face on the aging Internet company and help it find a profitable new revenue source on mobile devices.
Unlike most acquisitions of its size, the deal was conducted with little involvement from bankers, the New York Times reports.
When you know little about the asset at stake or the context, it makes sense to hire experts to do your negotiating for you—as long as you carefully monitor their work, align their financial incentives as closely as possible with your interests, and question their advice.
If you find yourself resisting the idea of entrusting your deal to experienced third parties, seriously consider the possibility that you are overconfident in your ability to both negotiate the best deal possible and know when to walk away from one that is subpar.
Since its founding in 2007, Tumblr has raised millions from investors and spawned more than 108 million blogs. Yet the company’s founder, David Karp, has resisted placing many ads on the service. Tumblr, which was valued at $800 million in late 2011, earned only about $13 million in 2012 and struggled to raise additional funds, according to the New York Times.