The latest rumor in Silicon Valley:

It’s no secret in Silicon Valley dealmaking circles that Yahoo has been looking at what insiders have called a “transformative” acquisition to jumpstart the company.

And while many think that has to mean grabbing one of the big content companies–such as AOL or Demand Media–right in Yahoo’s wheelhouse, sources said it is actually training its attention on, drum roll, commerce.

That would be local commerce, most specifically, companies such the hot start-up Groupon, which dominates social couponing.

Sources said Yahoo (YHOO) has been eyeing it for possible acquisition, which would put it smack dab in the hot space around local purchasing and consumer information.

via Yahoo’s M&A Strategy–Maybe Local Commerce Rather Than Content (Hello, Groupon!) | Kara Swisher | BoomTown | AllThingsD.

What it means: not surprising that people are sniffing around Groupon. Their success has been phenomenal.  Yahoo! has always been a fan of “local”, so no surprise there but I’m not sure Yahoo! would make a good deal (no pun intended!) buying Groupon though. Their valuation is through the roof and they’ve already started to expand in Europe (and I don’t think Yahoo! is trying to build up that continent). I suspect Yahoo! must also be looking at LivingSocial, the #2 player in the space, and will probably end up buying them.