As per news suggest Microsoft has announced that it is acquiring LinkedIn, the social network for professionals with some 433 million users, for $26.2 billion, or $196 per share, in cash. The transaction has already been approved by both boards, but it must still get regulatory and other approvals.
If for some reason the deal does not go through, LinkedIn will have to pay Microsoft a $725 million termination fee, according to Microsoft’s SEC filing detailing the merger.
The $196/share offer is a big hike on its closing price from Friday, $131.08. (And in premarket trading, unsurprisingly, LinkedIn’s stock has nearly crept up 64% to reach the share price MSFT is paying. Microsoft’s price is down 4% to $49.66 in pre-market trading.)
Here is the overview the Announcement
How Microsotft will Use LinkedIn: The Strategy
For Microsoft, it’s bringing a key, missing piece into the company’s strategy to build out more services for enterprises, and give it a key way to compete better against the likes of Salesforce (which it also reportedly tried to buy).
Today, Microsoft is focused squarely on software (and some hardware by way of its very downsized phones business). But LinkedIn will give Microsoft a far bigger reach in terms of social networking services and professional content — developing the early signs of enterprise social networking that it kicked off with its acquisition of Yammer for $1.2 billion in 2012. LinkedIn’s wider social network, pegged as it is to groups of employees and employers, will give Microsoft a sales channel to sell more of its products, and will serve as a complement to those that it already offers for collaboration and communication.
“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Nadella said in a statement. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.”
For LinkedIn, it puts to rest questions of how the company would ever compete with companies that are building more software on top of their social graphs that would put it into closer competition against LinkedIn. For a while, it looked like this was the direction that LinkedIn hoped to develop, but more recent problems with user and revenue growth, and a subsequent dropping share price, has put the company on the defensive.
The Win-Win Game of the Deal
Microsoft has never been a massively successful company when it comes to social networking — although it smartly invested in Facebook before it went public, and as we have reported before it was apparently interested at one point in trying to make a bid to buy Slack for $8 billion. LinkedIn’s social network will give it a significant foothold in this area.
LinkedIn is active in over 200 countries and has 105 million monthly active users, with 433 million registered overall. The company has some 60% of all traffic on mobile, and — thanks to some strong SEO — a crazy 45 billion quarterly page views. It’s also one of the biggest repositories of job listings, with some 7 million active listings currently. While some parts of LinkedIn’s business has stagnated, specifically with MAU growth (which is up only 9% on last year) latter is a growing business — up 101% on a year ago.
LinkedIn’s core business is based today around recruitment ads and, to a lesser extend, premium subscriptions for users. The recruitment business (termed “Talent Solutions”) accounted for $2 billion of the company’s $3 billion in revenues in 2015.
“Today is a re-founding moment for LinkedIn. I see incredible opportunity for our members and customers and look forward to supporting this new and combined business,” said Hoffman in a statement. “I fully support this transaction and the Board’s decision to pursue it, and will vote my shares in accordance with their recommendation on it.”