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History provides some insight on Microhoo

Although deals can break on dollars and sense, it often comes down to people and the chemistry between the principals.

Microsoft's announcement Monday that it was open to a new Yahoo deal, but only with a new board, struck some as odd. Wouldn't it be better for Microsoft to reach a pact now--with Yahoo's board on the ropes and ahead of its proxy showdown?

Perhaps, but I think Microsoft has come to the conclusion that it just can't deal with Yahoo's current board, regardless of how badly it might need Yahoo's scale.

Over the July 4 weekend, I read Barbarians at the Gate, the classic business tome about Kohlberg Kravis Roberts' takeover of RJR Nabisco. The book has many lessons that are applicable in this situation.

• Don't assume the other party has the same understanding from a meeting as you do.

• Not everyone who is interested in an asset is really willing to step up to the plate.

• Don't expect competitors to stand still.

And that's just to name a few. But the most important thing I took away was how important the human relationships were in determining who was willing to do a deal with whom.

Throughout the RJR saga, various players link up with one another or go separate ways in large part based on their personal relationships. In the end, the board of RJR Nabisco was faced with two bids. Neither was definitively better than the other. Its decision, to go with a buyout firm as opposed to its own management, rested in no small part on the fact it had lost confidence in and respect for the individuals in that management group.

In my mind, the reason is simple. Large transactions involve a whole lot of guesswork about the future. Such deals are a bet on what a business will be able to do. Since it's hard enough to predict one's own financial future, it's doubly hard to do so for another entity. That makes it all the more important to have trust in one's merger partners.