Microsoft is planning a boardroom coup to force Yahoo! to the negotiating table in an effort to get the beleaguered firm to accept its $42bn (£21bn) bid.
According to a report in The Times, Microsoft will nominate a slate of executives to sit on the Yahoo! board.
As part of the move, the software giant would replace Yahoo! representatives with its own who while not obliged are likely be favourable to Yahoo! entering talks with the software giant. The deadline for nominations is March 14.
The news followed reports that Yahoo's shareholders are looking to the courts to try to pressure it into accepting Microsoft's hostile bid, which the internet firm rejected as undervaluing the company.
Yahoo! said in its annual report that it is facing a number of lawsuits in California and Delaware, where the company is incorporated, which argue that it has acted illegally in fighting the Microsoft bid.
The annual report went on to dismiss the Microsoft bid as a distraction: "The review and consideration of the Microsoft proposal [and any alternate proposals that may be made by other parties] have been, and may continue to be, a significant distraction for our management and employees and have required the expenditure of significant time and resources by us."
On Friday Sir Martin Sorrell, the WPP Group chief executive, threw his weight behind the bid. He said it would bring more balance to the online search market, which is dominated by Google.
In an interview with Reuters, Sorrell said: "The prospective Microsoft-Yahoo deal would bring more balance to the market and I think our clients would welcome that. The question is can Microsoft do it effectively?
"I think it is probably going to happen but it is a question of execution. The idea that you'd have a more balanced market in search or display is something that we would welcome."
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