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Yahoo Dealmaker Reses Targets Mobile Talent in M&A Spree: Tech

Marissa Mayer’s strategy of using
deals to reignite growth at Yahoo! Inc. (YHOO) will hinge on the
success of a private-equity veteran named Jacqueline Reses who
was largely unknown in Silicon Valley six months ago.

Reses, a 43-year-old finance executive with an economics
degree, has been instrumental in closing a spate of acquisitions
since her hiring in September. Chief Executive Officer Mayer has
put Reses in charge of talent management and mergers and
acquisitions, as the biggest U.S. Web portal struggles to
reinvent itself and stay relevant in the age of all things
mobile. Reses’s mandate has expanded to include partner and
culture development, and this week she was given the new title
of chief development officer, Mayer said in an interview.

Almost a year into her tenure, Mayer is racing to transform
the company into a more robust competitor to Google Inc. and
Facebook Inc. for users, advertisers and employees, and Reses is
critical to that effort. Yahoo has cash and equivalents of about
$6 billion. Reses’s dealmaking challenge is finding targets
specializing in cool technologies that can make its own pages
and services more attractive.

“Marissa Mayer is trying to bring back talent to Yahoo and
make it a place which has vibrancy in Silicon Valley,” Gene Sykes, co-head of global mergers and acquisitions at Goldman
Sachs (GS)
Group Inc. and a former colleague of Reses, said in an
interview. “One way you do that is by buying startups and
combining the people.”

Talent Retention

The company must also persuade the smart, young software
geeks who come with its MA deals to stick with Yahoo.
Entrusting human resources to the person in charge of landing
deals may ease the difficulty of hanging onto entrepreneurs —
such as Nick D’Aloisio, the 17-year-old founder of Yahoo target
Summly — who become rich after selling out.

Before Mayer’s arrival, Yahoo lost hundreds of key
executives and skilled engineers to faster-growing rivals
offering more alluring equity and better workplace amenities.

“It’s a land grab for talent, and it’s a land grab for
great innovative products,” said Kevin Stadtler, president of
Stadtler Capital Management, which has $16.4 million under
management, including Yahoo shares. “They have billions of
dollars at their disposal to acquire talented companies in
digital media.”

Six Startups

Yahoo has purchased six startups — Stamped Inc., OntheAir,
Snip.it, Alike, Jybe Inc. and Summly — since July, when Mayer
took over as the Web portal’s fifth CEO in four years. So far,
she’s concentrated on talent acquisitions — small teams bought
at low prices — an approach she advocated during her first
conference call with analysts last year.

Reses, who has worked at Goldman Sachs and most recently
spent 10 years at Apax Partners LLP, has been at the center of
many of these deals. The company paid $30 million for news-
reading app Summly and three of its employees. Emin Gun Sirer, a
Cornell University computer science professor, said he thinks
Yahoo overpaid, given that Summly’s core technology isn’t
impressive or complex.

Reses has also been quick to earn a reputation as a no-
nonsense manager. In December, she sent an e-mail to Michael Katz, a Yahoo advertising executive, summoning him to an
impromptu Sunday-night meeting at a New York bar.

The meeting didn’t last long: Reses fired Katz, two weeks
before he was due to receive a bonus related to Yahoo’s 2011
acquisition of his startup, Interclick Inc., according to the
complaint in a lawsuit filed by Katz.

Employee Memo

Yahoo didn’t make Reses available for comment. Sara Gorman,
a company spokeswoman, declined to comment on the executive or
acquisitions.

Reses is also the author of a now-infamous February memo
that restricted employees’ ability to work from home. The policy
switch revived a nationwide debate over flexible work schedules,
pitting advocates who say it enhances productivity against
critics who say coming into the office fosters collaboration and
creativity.

While the company is focused on small groups of engineers
and more modest deals, it may also need to set its sights on
larger, more transformative acquisitions, said Brian Wieser, a
New York-based analyst at Pivotal Research Group LLC. He cited
companies such as social-media sites Tumblr Inc. and Pinterest
Inc. as well as Yelp Inc. (YELP) and AOL Inc., among others.

Intelsat, Cengage

“Jackie basically works on development around the company
on four different fronts,” Mayer said in the interview. “She
works on talent development, cultural development — those are
both on the human resources side — as well as partner
development and corporate development.”

As head of the U.S. media group at London-based Apax, Reses
oversaw deals such as the $5.2 billion purchase of satellite
provider Intelsat in 2005 and the $7.75 billion acquisition of
textbook publisher Cengage Learning Inc. in 2007.

While evaluating and executing deals, Reses was known for
her attention to detail around technology and products, said
Mark Patricof, co-founder and managing partner of investment
bank MESA Global, who knew Reses while she was at Apax.

“Jackie, for a private-equity partner, had a level of
curiosity that is more typical of an early-stage investor,”
Patricof, who is based in New York, said in an interview. “She
asks a lot of questions.”

She’s now asking those questions at Yahoo, the slowest-
growing U.S. Internet company larger than $1 billion, analysts’
estimates compiled by Bloomberg show. Yahoo’s revenue may climb
just 1.8 percent in the next four years to about $5 billion,
compared with other large Web companies’ projected median sales-
growth rate of 74 percent over that span, data compiled by
Bloomberg show.

Overseeing MA

Mayer said she met Reses while looking for a human-
resources chief and was impressed with her experience overseeing
big acquisitions involving thousands of employees.

“Her perspective on how to integrate companies well from
the private-equity sphere works really well in terms of what
we’re trying to do here,” Mayer said in the interview.

Fresh engineering blood could help Yahoo make inroads in
mobile software, a rapidly growing industry dominated by Google
and Apple Inc. (AAPL), and improve its ability to sell ads and show
users personalized content.

Weekly Meetings

Possible uses for cash are discussed during a weekly deal-
review meeting at Yahoo’s headquarters in Sunnyvale, California,
a person familiar with the matter said. During the meeting,
which is led by Mayer, Reses gives updates on prospective
targets and deals in progress, the person said.

Dealmaking prowess aside, her lack of human-resources
experience may be a hindrance, according to people who have
worked alongside her. In one compensation meeting, Reses said
she thought top workers at Yahoo were paid fairly, disagreeing
with other executives who expressed concern that rivals such as
Apple and LinkedIn Corp. (LNKD) had been poaching workers by paying
them salaries as much as 40 percent higher, said a person who
was present.

“Some might describe it as an unconventional choice in
light of the fact that she’s never run an HR department
before,” said Spencer Rascoff, CEO of real-estate website
Zillow.com Inc. and a former colleague of Reses. “But
unconventional is probably exactly what Yahoo needs.”

Goldman Banker

Reses will be able to draw on her experience as an
investing vice president at Goldman Sachs in the 1990s, where
she volunteered to help run a recruiting program for entry-level
bankers in the technology and mergers group, Sykes said.

Wieser said the company may be looking at bigger potential
targets. In addition to Tumblr, Pinterest, Yelp and AOL, he said
Yahoo may consider Foursquare Labs Inc.; MSN, now owned by
Microsoft Corp.; and advertising-technology companies Millennial
Media Inc. (MM)
, Jumptap Inc., Rubicon Project and PubMatic Inc.

Katherine Barna, a spokeswoman for New York-based Tumblr,
did not respond to requests for comment. Representatives from
all other companies cited by Wieser declined to comment on the
potential for a Yahoo deal.

Reses told employees at a staff meeting in late February
that Yahoo is working on two “significant” acquisitions,
according to a report in technology blog AllThingsD. Last month,
the Wall Street Journal reported that Yahoo was in talks to buy
a stake of as much as 75 percent in France Telecom SA’s
Dailymotion video site, which is valued at about $300 million.

To help scout out potential deals, Reses plans to move her
family to the San Francisco Bay Area from her current home in
New York. Last month, she hired venture capitalist T.R. Newcomb
to help manage mergers and acquisitions in New York.

With the creation of a chief development officer role at
Yahoo, Mayer said she hopes to influence the way industry thinks
about the development of talent. She pointed to the emergence of
the chief information officer role in recent decades as an
example of business adapting to a changing world.

“Sometimes a need really crops up at companies, and
there’s a thematic stitching together that occurs of a role,”
Mayer said. “While Jackie may be the world’s first chief
development officer, she won’t probably be the world’s last.”

To contact the reporter on this story:
Douglas MacMillan in San Francisco at
dmacmillan3@bloomberg.net

To contact the editor responsible for this story:
Tom Giles at
tgiles5@bloomberg.net

(248)

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Mystic Maggie

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