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What Google could learn from Yahoo's acquisition strategy

June 19, 2013: 12:45 PM ET

google-hqGoogle wants to partner with private equity on complicated deals. But there may be a better way.

FORTUNE -- Google Inc. may soon partner with private equity firms to acquire other companies, according to comments made yesterday by Google mergers and acquisitions chief Don Harrison.

But isn't there a better option? Like adding private equity veterans to Google's (GOOG) in-house corporate development team, like Yahoo (YHOO) has done?

Here was Harrison's explanation, as paraphrased by Bloomberg Businessweek:

Buyout firms can assist an acquirer by providing needed financing or advice on how a target could be restructured or carved up after a deal closes. While Google may invest cash to get a return on the investment, it may also take part in a deal to acquire an asset.

For starters, it's hard to understand why Google would ever be in need of "financing" assistance. The search giant had more than $15 billion of cash on hand at the end of Q1, which expands to $50 billion once "short-term investments" are taken into account. It also has a pretty valuable currency in its own stock, which opened trading today at $901.30 per share.

So that leaves the "advice" piece. If Google just wants people who know how to manage complicated transactions, or maximize value from non-core assets of acquired companies, why not just hire them? Not only would Google get the desired expertise, but it also could get a different perspective on more traditional deals.

This is basically what's happened over at Yahoo.

Last September the company hired Jacqueline Reses as chief development officer, where her responsibilities include overseeing M&A. Reses previously spent ten years with private equity firm Apax Partners, including as head of its U.S. media group.

And Reses hasn't been going it alone. Already this year she has hired two new vice presidents from the private equity world: T.R. Newcomb (ex-General Atlantic) and Ian Weingarten (ex-Gores Group/Apollo Management). She also leverages Yahoo board member Harry Wilson, who currently runs a turnaround and restructuring boutique and used to be a partner with credit-oriented investment firm Silver Point Capital.

Google, on the other hand, does not appear to have any corp dev executives with significant private equity experience (a few spent time as lower-level analysts early in their careers).

[Update: My bad, forgot about Scott Tierney, who previously was with Steelpoint Capital Partners]

No be clear, I'm not arguing that Google needs private equity veterans in order to do good deals. Nor am I saying that private equity experience matters too much when acquiring a company that has insignificant cash flow (i.e., Tumblr).

Instead, just pointing out that if Google believes there are opportunities out there that could benefit from private equity acumen, it needn't dilute its risk/reward by partnering with private equity firms. Just partner with their (former) partners.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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