In a move which could pose some serious challenge to the search engine giant Google, Microsoft and Yahoo have joined hands in a partnership to unite their services, and the deal between the two technology and internet giants has now been given a go-ahead by Australia and Canada.

The deal, which would award Microsoft the exclusive license to power Yahoo's search engine for 10 years via its own start-up engine Bing, has gained approval from both Australian Competition and Consumer Commission and the Canadian Competition Bureau, making them the first regulators in the world to give a green light to the deal. The ACCC was quoted as saying that it would "not block a deal between Microsoft and Yahoo to combine search engine technology".

Both the companies tied in the deal have confirmed the development, while sharing that the arrangement would save them about US$200 Million in expenses, collectively, and hike cash flow by nearly $275 Million a year.

"In combining search engine platforms, Microsoft and Yahoo may have been able to achieve the necessary scale to provide effective and sustainable competition to Google, which had a very large share of online paid search advertising queries", wrote the ACCC in its report on the deal.

The deal is now subject to US and European approvals, but the officials are positive that it be awarded by both nations by early 2010.