Top ex-Yahoos are advising a Buffett-financed group in a bid for the company

Apparently, once you bleed purple, you never stop.

At least that is the case in the sale of Yahoo, which is now in its second phase of bids from prospective buyers that include strategics like Verizon, as well as private equity firms like TPG, Sycamore Partners and the pairing of Vista Equity Partners and Bain Capital.

In the Bain/Vista bid, former senior Yahoo execs including Ross Levinsohn, Bill Wise and Ken Fuchs are involved in the process. Now, according to sources close to the situation, former Yahoos Dan Rosensweig and Tim Cadogan have been advising a group led by Quicken Loans founder and Cleveland Cavaliers owner Dan Gilbert.

Reuters reported on the Gilbert effort earlier today, including the intriguing news that famed investor Warren Buffett was willing to play bank to that deal.

The Reuters report did not provide a lot of detail as to the thinking behind the Gilbert bid, so let me chime in:

Both Rosensweig and Cadogan were present in the day-long meeting on Friday for the Gilbert group, one that was much like all second-round bidders have been having with Yahoo CEO Marissa Mayer and other top execs.

They were there to help Gilbert grok the company and they'd certainly be useful tour guides. Rosensweig, now CEO of Chegg, worked at Yahoo from 2002 to 2006 as COO, and Cadogan, now CEO of OpenX, was in charge of big swathes of its search and advertising businesses from 2003 to 2008.

Sources said neither is interested in taking a larger managerial role in the company, even if the Gilbert bid were to be successful, but were simply acting as advisers. Gilbert and his execs from Quicken Loans also had a private meeting with Mayer.

Gilbert, in turn, is getting an assist from Buffett, who is offering the consortium a preferred instrument, much like those he has done in previous transactions with Goldman Sachs and General Electric.

Without going into a lot of banker-speak, via his famed Berkshire Hathaway, Buffett would help fund Gilbert's bid. While Buffett has shied away from tech investments, he is close to Gilbert, and it is also a good deal with downside protection. The investment could give him cash interest on an ongoing basis and a potential to convert it to equity.

In other words, Buffett plays the moneybags, much in the same manner that Microsoft has been discussing with Yahoo bidders, as Recode has previously reported. Several investment banks have also offered to finance other bids.

"It's purely a financial transaction for Buffett, who would not do it if it was not for Dan Gilbert's interest," said one source with knowledge of the situation.

How much the pair can afford to spend on Yahoo is unknown, but many sources expect the core to sell for about $4 billion, after backing out $1.2 billion in patents and real estate.

As for Gilbert, sources said he has long been interested in building a bigger digital footprint. He has a number of internet investments, but none as large as Yahoo. He also has two venture capital firms, aimed at both early-stage technology companies in Detroit and also in sports.

"He thinks he can do something with Yahoo," said another source. "It is an iconic brand."

Interestingly, Gilbert and Buffett have had an encounter with Yahoo and Mayer before, even if was tense and resulted in legal action related to a contest called the "Billion-Dollar Bracket Challenge." The Buffett-backed effort was similar to one Yahoo had considered and then abandoned, offering $1 billion if someone picked all the winners of the 2014 NCAA Men's Basketball Tournament.

(And there is another ex-Yahoo twist here: Former president Sue Decker is on the board of Berkshire Hathaway, and it's no leap to guess that Buffett and Gilbert are also likely to hit her up for advice on the bid. Full disclosure: Decker is also on the board of Recode owner Vox Media.)