If there were a blood bank for bad blood, Yahoo! (NASDAQ:YHOO) and Microsoft (NASDAQ:MSFT) would be its biggest depositors.

The Microhoo saga took another ugly turn over the weekend, when Yahoo! quickly shot down a renewed offer by Microsoft to acquire Yahoo!'s search business.

According to Yahoo!, Microsoft teamed up with Carl Icahn with an offer to acquire the battered company's flagship search engine on Friday night, under the condition that Yahoo! accept the deal within 24 hours.

It nixed the rushed proposal.

Four reasons why Yahoo! shook its head
As desperate as Yahoo! may be to salvage itself, it thankfully wasn't gullible enough to fall into Microsoft's trap. As critical as I've been of Yahoo! through this interminable saga, selling just its search business would crush the scraps of Yahoo! left behind.  

Yahoo! spelled out four reasons for not buying into the deal as the egg timer ran out. Let's go over them.

1. Yahoo!'s existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft/Icahn proposal.

Its agreement to outsource at least some of its paid search space to Google (NASDAQ:GOOG) is less complex, but not necessarily less risky. Antitrust regulators may not look kindly on the world's leading search engine also servicing ads to the distant silver medalist.

However, letting Google borrow its search business is better than handing it over to Microsoft. Yahoo! believes that it can deliver $250 million to $450 million in incremental cash flow during the first year of its outsourcing pact with Google. That is a humbling knock on its own marketing arm, but it's real money for a company that needs to justify its lofty earnings-based valuation relative to other search stars like Google and Ask.com parent IAC (NASDAQ:IACI).

2. The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo! for a full and fair price, including a control premium.

Good point. Even if it was only Microsoft willing to lift a bidding card, why would anyone want to buy Yahoo! sans its search engine business? It's actually surprising to see Icahn on board with this piecemeal deal, since Yahoo!'s stock is unlikely to recover the paper losses that Icahn has suffered.

Even if volume page view producers like Time Warner's (NYSE:TWX) AOL or News Corp. (NYSE:NWS) would love to take advantage of Yahoo!'s nonsearch traffic, they are unlikely to pay much for a ton of poorly monetized pages.

3. The major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo!'s remaining non-search businesses which would be overseen by Mr. Icahn's slate of directors, which has virtually no working knowledge of Yahoo!'s businesses.

This is the one argument that Yahoo! will lose, as its own board has proven inept in keeping up with the industry. Who are Yahoo!'s directors? Beleaguered Yahoo! bigwigs and airline executives? Save for a few guys with entrepreneurial grit and the CEO of Activision (NASDAQ:ATVI), the company's board is certainly not its strong suit.

4. The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! for the up to … one year it would take to gain regulatory approval for this deal.

Yahoo! can't really save itself at this point. Even if the board is somehow spared during its shareholder meeting in three weeks, investors will be sending a loud message for change, and that will mean the introduction of new leaders from the outside to take over the company.

The argument that it would take up to a year to approve the deal is also a reach. Anything that poses a threat to Google's disturbingly growing market dominance will be rushed into acceptance.

I think Icahn
The one thing missing in all of this is Icahn's angle. Even Yahoo! was savvy enough to dig into the transcripts, pulling this gem of a quote out of Icahn on CNBC last month.

"It's crazy for this company now to do this alternative deal and give the store away, because obviously, an alternative deal is a poison pill because once you've done an alternative deal and given the search to Microsoft, you don't need Microsoft to buy you anymore," Icahn said, according to Yahoo!'s statement.

Then again, with Microsoft and Yahoo! being painted as stubborn, closed-minded negotiators, at least somebody has shown the willingness to change his mind.

Other survival guide reading:

Microsoft is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Activision and Time Warner are Motley Fool Stock Advisor picks. Try any of our Foolish newsletters today, free for 30 days. Access to all past issues is included.

Longtime Fool contributor Rick Munarriz feels that weekend fireworks can be dangerous. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.