The recent declaration of Yahoo and AOL being in due diligence has made it more likely that a merger may occur between them. Diligence is a process through which companies pass when there is a possibility of negotiations for an acquisition. The declaration of the two companies involved in talks came months ago. Yahoo has been looking for a way to survive in the market without giving a green light to the takeover bid by Microsoft.

Earlier in the year Microsoft had approached Yahoo for a takeover only to be rejected. Ultimately the software giant withdrew the proposal. Similarly, Yahoo has been in talks with AOL for most of the year. It only looks like now that some progress has been made. The current talks are pertaining to integration of AOL’s content and advertising business into Yahoo’s operations. As per sources Time Warner could also have a stake in this.

The integration process is also centred on whether to keep separate portals and e-mail services, and cost savings that could be made by reducing duplication. Shares in both the organisations have dropped over 2008. Time Warner has seen a 45% drop and Yahoo has seen a 63% drop. The current negotiations would help the two companies in their assessment of how a merger would affect their shares and profits in future.

AOL has made certain changes in its homepage. Now users can access their Yahoo mail accounts from AOL.com. Access to social networking sites were also incorporated, including the first real integration of Bebo on its homepage since AOL’s acquisition of the social site earlier in the year. As a result, traffic to AOL.com has risen by 14 per cent.

Neither side has made any statements on the reports. It could mean that the deal has not been reached yet.