2 Big Reasons Yahoo! Inc. (YHOO) Won’t Buy Zynga Inc (ZNGA)

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Zynga Inc (ZNGA)Shares of Zynga Inc (NASDAQ:ZNGA) popped by as much as 11% Monday after Wunderlich Securities analyst Blake Harper suggested it might make sense for Yahoo! Inc. (NASDAQ:YHOO)! to acquire the social game maker.

To be sure, the rumor mill has been buzzing ever since word got out last week that Jackie Reses (Yahoo! Inc. (NASDAQ:YHOO)’s head of mergers and acquisitions) let it slip to employees that the company was working on two “significant” acquisitions.

Unfortunately for the Zynga Inc (NASDAQ:ZNGA) bulls, I just don’t see a buyout happening for myriad reasons. For the sake of brevity, however, here are two of the biggest things that would make Yahoo! think twice about entering the social gaming space via Zynga.

Sure enough, shares of Zynga Inc (NASDAQ:ZNGA) lost ground Tuesday after analysts at Macquarie Capital poured cold water on the buyout thesis, saying “We believe that Zynga Inc (NASDAQ:ZNGA) is unlikely to be acquired anytime soon, as we don’t believe that Mark Pincus wants to sell at this time.”

Yep, that’s the same Mark Pincus named The Motley Fool’s Worst CEO of the Year in 2012. Still, even if Yahoo! actually wanted to buy his company, would you blame him for not wanting to sell? After all, Yahoo! CEO Marissa Mayer has been taking flak this week for her notoriously stringent hiring standards and, given Pincus’ painful past transgressions, something tells me any Zynga buyout scenario likely wouldn’t involve keeping him around.

Then again, perhaps that wouldn’t be much of an issue anyway, since Pincus hasn’t shown much restraint with regard to dumping his own personal stake in his company. Nonetheless, his persistent demonstrations of a lack of faith in Zynga don’t bode well for its prospects, especially when we remember eight of its high-profile executives voluntarily packed their bags last year between August and September.

All things considered, none of this is particularly encouraging to potential suitors.

Stronger, cheaper acquirees
With Zynga’s market capitalization at just under $3 billion, Yahoo!’s $4 billion in cash and liquidity (as of the end of 2012) would require a good amount of their dry powder to acquire the company outright. Even accounting for Zynga’s own veritable cash pile of $1.3 billion, the fact remains Zynga Inc (NASDAQ:ZNGA) is still barely profitable. In addition, I’m hardly alone in believing its business is simply unsustainable over the long run.

Besides, Harper’s mention of Zynga Inc (NASDAQ:ZNGA) seemed more of an afterthought following more serious speculation about why it might make sense for Yahoo! to purchase smaller companies like restaurant reservation specialist OpenTable Inc (NASDAQ:OPEN) or review provider Yelp Inc (NYSE:YELP) — the respective market caps of which are significantly lower ($1.4 billion and $1.5 billion).

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