April 10 (Bloomberg) -- Marissa Mayer’s strategy of using deals to reignite growth at Yahoo! Inc. 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 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.”
The company must also persuade the smart, young software geeks who come with its M&A 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.”
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.
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 might consider larger acquisitions, said Brian Wieser, a New York-based analyst at Pivotal Research Group LLC. If Yahoo did pursue bigger deals, potential targets could include social-media services Tumblr Inc. and Pinterest Inc. as well as Yelp Inc. and AOL Inc., among others.
“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.
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., and improve its ability to sell ads and show users personalized content.
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. 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.”
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., 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.”
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