Despite the fact that the deal was one of Yahoo’s biggest acquisitions, the negotiations were conducted largely through principals. The deal ranks as Yahoo’s fourth-biggest ever, according to Standard & Poor’s Capital IQ. The only bigger transactions were the company’s takeovers of Broadcast.com ($5.7 billion), Geocities ($3.6 billion) and the ad company Overture ($1.6 billion).
The Tumblr deal came together after just less than a month of discussions between the two sides, a person briefed on the matter told DealBook. Tumblr was considering ways to raise cash this year when it received a number of expressions of interest from bigger companies like Facebook, Microsoft and Google. By that point, Tumblr was contemplating some sort of investment or tie-up with a strategic partner, hoping to gain additional distribution and ad sales support.
Among the interested companies, Yahoo appeared the most focused on completing a transaction, this person said. The company – and in particular its chief executive, Marissa Mayer – worked hard to persuade Tumblr’s founder, David Karp, that his start-up would remain independent and would not be harmed.
Leading the talks for Yahoo were Ms. Mayer and Jackie Reses, the executive in charge of development, with some assistance from the chief financial officer, Ken Goldman, this person said.
The only bankers on the deal were on Tumblr’s side. Its board retained Qatalyst Partners, the boutique investment bank run by Frank P. Quattrone. The deal team included Mr. Quattrone and Jonathan Turner, a co-founder who specializes in Internet and mobility companies.
The dearth of investment bankers echoes the last big deal in the social media space, Facebook’s takeover of Instagram. That deal was largely hashed out by the companies’ two founders, Mark Zuckerberg and Kevin Systrom, over a weekend last year – one that included a viewing party for the HBO series “Game of Thrones,” according to Vanity Fair.
Lawyers were involved in both deals, however. Yahoo was advised by Simpson Thacher & Bartlett.
Future Yahoo deals are more likely than not to forgo bankers. On a conference call with analysts on Monday, Ms. Mayer said the Tumblr purchase was “obviously an exception” to her strategy of buying smaller start-ups for their engineering talent.
But she compared the acquisition to Yahoo’s takeover of Overture, which overhauled the company’s ad services.
“Usually, when you do an acquisition of this scale, it becomes a core part of strategy,” she said. “The hope here is that this significantly contributes to our growth story.”