Last Friday I wrote that Yahoo should accept a buyout of its entire company, were such an offer to be made. Reports are that it could be coming shortly from a group that includes two private equity firms and Yahoo’s major corporate partners in Asia (including China’s Alibaba Group). This would be preferable, in my opinion, to a pair of existing bids for 20% of the company that would value Yahoo (YHOO) lower and expose it to significant tax liabilities.

But there was one significant issue I neglected to mention: The political impact of a Chinese company effectively owning one of America’s technology icons.

Here is how one reader put it to me in an email:

Can you imagine a private Chinese company that operates protected by the Chinese government trying to buy a major American technology company during the 2012 election cycle, during a vicious recession, with Romney already demanding a trade war with China and Obama desperate to prove he’s not anti-American?

Well, when you put it that way…

Actually, let’s dig into this a bit. Romney has indeed said that China and the U.S. are in a trade war, and loudly objecting to Alibaba’s participation in a Yahoo buyout could be a resonant example to amplify his point. After all, millions of Americans don’t view Yahoo as a poor man’s Google or rich man’s AOL. They just view it as their homepage and/or email provider, and might get freaked out by the idea of a shadowy Chinese company having indirect access to their private conversations or content preferences.

The only problem is that one of Alibaba’s partners on the proposed deal is the one Romney founded (Bain Capital), while the other (The Blackstone Group) is led by a Romney supporter who is hosting a campaign fundraiser at his Park Avenue apartment.

Were Romney running on his gubernatorial experience in Massachusetts, then perhaps he could shrewdly bite the private equity hands that feed (“I’m not beholden to anyone, yada yada…”). But he’s spent the past five years running away from Massachusetts and telling everyone that his top qualification is as a successful manager in the private (equity) sector. If he attacks Bain, he undercuts his own resume. And it would be far too cute to simply go after current Bain management as having strayed from Romney’s path, given that he handpicked many of the firm’s current leaders.

So I don’t see Mitt Romney objecting too loudly. President Obama, on the other hand, isn’t tied by the same historical shackles.

To date, the Obama Administration hasn’t sought to squash too many large corporate mergers. It currently is doing its damndest on AT&T/T-Mobile, but that seems to be more of a one-off situation than policy shift.

Fighting Alibaba/Yahoo, however, wouldn’t be about maintaining competition for American consumers. It would be about national security (the aforementioned privacy issues), plus retaliation for the Chinese government interference faced by U.S. Internet companies trying to do business in that country. “If you’re going to make life hard for our Internet companies over there, we’re going to make life hard for your Internet companies over here.” Good grist for the populist mill, and could help Obama develop a stark contrast between himself and “businessman” Romney.

This isn’t, of course, to suggest that Obama would take such a tact (it does feel a bit out of character). Particularly if Democratic Party stalwarts like Bain’s Steve Pagliuca or Blackstone’s Tony James are able to successfully plead their case. But he is the better-positioned candidate to do so, and the very possibility could give Yahoo pause before approving any deal that involves Alibaba (even if it only participates as a way to buy back its shares). After all, Yahoo can ill-afford 12+ months of regulatory review with an uncertain outcome.

All of this presupposes that Romney is the GOP nominee. If it becomes Gingrich, then all bets are off. He has previously said that  “the more the Chinese and Americans [sit] down together to create more wealth, the happier they’ll be with each other, the less likely we’ll have conflict.” On the other hand, he also used to endorse Fannie and Freddie, so all bets are off.

What all of this means is that Yahoo has a serious challenge ahead, if it does receive the Alibaba-led offering: How does it structure the deal so that the U.S. private equity firms are able to hold operational control. And then how does it get that message out to U.S. consumers. I stand by my earlier argument that such a transaction is preferable to the 20% sales, but also felt the need to acknowledge the corresponding political risks. As always when dealing with Yahoo, nothing comes easy.

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