If you and Marissa Mayer want the last burger in the world, how much is it worth? What if you're Mark Zuckerberg, and it's really important to her that you don't get a taste of that burger? Maybe she doesn't even like burgers.

Factors like the cost of the burger, or how fresh/tasty it is, become less important.

Also, all-cash doesn't mean what you think it means. The currency used to pay for a company (cash, stock, pork bellies, whatever) is independent of the vesting schedules of the employees/founders acquired. Typically investors receive most stock/cash immediately, while employees receive some up front and the rest over a period of time that is negotiable. 3-4 years is standard. Some deals are front-loaded (more than 50% in the first half) and others are back-loaded (the reverse).

The point about vesting is one I hadn't considered. Thanks.

Re: the burger analogy, that also makes sense in the context of there being competition for this deal. But aside from a puff piece in TC which looks placed by sources (aka Tumblr banker Frank Quattrone), there didn't look like much competition in this case.

But nevertheless, thanks for the informative answer.

Well, if you are British, you'd want to check that burger doesn't contain horse meat.

And as amusing as that might or might not be, there is also a point there.

There's nothing wrong with horse meat.

There are far fewer controls and standards for horse meat in much of the EU, meaning a lot of the meat which was being passed off as beef could potentially contain dangerous drugs not fit for human consumption.

If it's properly regulated though, you're right that there's no problem with it.

Potentially, there's a problem with any meat if you can't have confidence in where it came from. (British buyers didn't know they were buying food containing horse meat. They were being duped.)

If the beef isn't beef, you can't really count on any of the other food integrity items - like freshness - to be accurate either.

Horse meat's fine, I've had it... but it's unacceptable and potentially dangerous to have it sold as beef.

Who said there was?

unless it is sold as beef , then it is a scam since horse meat is quite cheap ,beef is not.

One must never look at this deal based on the acquired's metrics and dynamics. One must look at this based on the impact of the acquirer. Instagram was worth $1 billion as it was potentially a $10 billion reduction in FB's valuation at IPO with this threat hanging out there. Tumblr is worth a billion because of the strategic value to Yahoo. In this particular case Yahoo can close massive gaps in age demographics and mobile in one fell swoop. Tumblr was discussing ad revenue of $100 mil this year. Yahoo, with much deeper experience and relationships here, can probably do much better than that this year and beyond. So it may "pay for itself" within 3 - 5 years which is nice on top of all the other benefits.

Yahoo could monkey around and try and pick it up in a "fire sale" in 12 months for $500 mil. But maybe that never happens and they still wake up tomorrow well behind in the youth and mobile demographic. I love that Yahoo, after sooo many years of indecisiveness, is being decisive and bold. Not sure if it'll pay off but these seem to be well thought out calculated risks.

>Tumblr was discussing ad revenue of $100 mil this year.

But weren't there other reports that they were going to hit 15M instead? Whoops. If they had 100M revenue, they wouldn't me needing to raise more cash; their burn is far smaller.

Maybe if they let it die, the service slowly dies too, and then the audience leaves -- Assuming that's kind of what Yahoo is after in the first place; but I'm completely guessing here

All cash does not mean there isn't a portion of it restricted to a time or objective based schedule for key employees (or even all employees and shareholders).

If they intend to continue operating it (highly likely) buying while they are still with cash, all of their staff, and vibrant is quite possibly a better outcome than buying a broken company for less even only a few months later.

Disclosure: I am long Yahoo in my personal portfolio and I've led many M&A activities for Rackspace.

Also, the question isn't $1.1B or nothing, it's what amount would Tumblr say yes to?

Would they really have turned down an offer of $700 million? $800 million? Was $1.1B really the least they'd accept?

I bet they would have accepted significantly less, rumors to the contrary.

But the billion dollar headline has its own value, I guess.