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Twitter’s management held talks with Yahoo about a possible deal, it was reported, while it was separately noted that private equity firms eyeing Yahoo’s assets are being squeezed by tech players such as AT&T.

Second round bids for Yahoo’s core internet business are due this week, and a winner could be selected in early July. Twitter was more interested in “sucking information” regarding Yahoo’s financials from the talks, and then bowed out of the bidding process, according to the New York Post.

The report quoted a source as saying that “Twitter is the destination for instant news, and Yahoo has a lot of eyeballs on its site. The idea isn’t as crazy as you might think.”

However, another source said Twitter CEO Jack Dorsey wasn’t present at the meeting, indicating the firm wasn’t serious about a merger.

Sources also told the Post that Twitter would be scared of making such a move because its shareholders “would be outraged” and that this was not “an unfounded fear”.

Twitter, which has yet to post a profit, has been struggling as it seeks to increase its user base. Last month AT&T emerged as a contender for core Yahoo’s assets, potentially setting up a face-off with rival Verizon.

This could mean private equity firms, which often rely on debt to finance buyouts, will no longer be in the running, as they will have to compete with “well-capitalised” acquirers capable of making bids they cannot match, Bloomberg reported.

Yahoo has so far received more than ten offers, ranging from between $4 billion and $8 billion.

Apax Partners, TPG Capital, Bain Capital, Apollo Global Management and Warburg Pincus were among the private equity firms that submitted bids in the first round.

These firms will find it hard to outbid Verizon and AT&T as they usually acquire businesses that are growing, in order to provide cash to fund the debt. But Yahoo is on the slide, reporting a Q1 revenue fall of 11.3 per cent and a net loss of $99 million.

Tech players could make bids that are not based solely on Yahoo’s financial performance, for example looking to benefit from synergies from combined operations.

Verizon has long been considered as the frontrunner to buy Yahoo, and remains favourite, despite not submitting one of the biggest offers in the first round of bidding.

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