Simone Lawson
In 2016, Microsoft acquired LinkedIn for $26.2 billion, making it one of the most expensive tech deals in history. The acquisition was first discussed in February 2016, when LinkedIn CEO Jeff Weiner and Microsoft CEO Satya Nadella met to explore ways to enhance their commercial relationship. The deal was officially announced in June 2016, with Microsoft paying $196 per share in an all-cash transaction. The acquisition was seen as a strategic move by Microsoft to strengthen its position in the enterprise market and enhance its social media presence. LinkedIn, as the world's largest professional network, offered Microsoft an opportunity to leverage its 400 million members and improve its mobile presence. The deal also aligned with Microsoft's Dynamics Cloud business and presented a challenge to CRM market leader Salesforce.
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What You'll Learn
The deal was negotiated over several months
The Microsoft-LinkedIn merger was negotiated over several months, with the first formal discussion between the two companies taking place on February 16, 2016. During this meeting, LinkedIn CEO Jeff Weiner and Microsoft CEO Satya Nadella discussed ways to enhance their ongoing commercial relationship, and the concept of a business combination was raised.
Nearly a month later, on March 10, Salesforce (referred to as Party A in some sources) requested a meeting with Weiner to discuss acquiring LinkedIn. Weiner met with Salesforce CEO Marc Benioff, and a few days later, Benioff informed Weiner that Salesforce had hired a financial advisor to analyze the potential acquisition.
On May 14, 2016, LinkedIn and Microsoft signed a 30-day exclusivity agreement, prohibiting LinkedIn from soliciting other proposals. This agreement formalised deal discussions and set a timetable for signing a definitive agreement. Microsoft ramped up its due diligence in the following weeks, and various merger agreement stipulations were negotiated, including a major discussion on the termination fee.
On June 10, 2016, LinkedIn emphasised to Microsoft the need to increase their offer, suggesting a deal could be reached at $196 per share, all cash, contingent on approval by LinkedIn's board. The next day, Nadella informed Weiner that the Microsoft board had agreed to the terms. Later that day, legal counsel for both sides finalised negotiations regarding breakup fees and the final version of the merger agreement.
The definitive agreement was announced on June 13, 2016, with Microsoft acquiring LinkedIn for $196 per share in an all-cash transaction valued at $26.2 billion. This acquisition was one of the most expensive tech deals in history and the biggest acquisition in Microsoft's history.
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The final price was £26.2 billion
On June 13, 2016, Microsoft announced that it had entered into a definitive agreement to acquire LinkedIn for $196 per share in an all-cash transaction valued at $26.2 billion. This price included LinkedIn's net cash. The acquisition was Microsoft's largest in its history, uniting two companies in different businesses: one a large maker of software tools and the other the largest business-oriented social networking site, with over 400 million members globally.
The acquisition was first discussed on February 16, 2016, when LinkedIn CEO Jeff Weiner and Microsoft CEO Satya Nadella met to explore ways to enhance their ongoing commercial relationship. On May 14, 2016, the two companies signed a 30-day exclusivity agreement, prohibiting LinkedIn from soliciting other proposals. On June 10, 2016, LinkedIn pushed Microsoft to offer a higher price of $196 per share, and the Microsoft board agreed the next day.
The acquisition was unanimously approved by the Boards of Directors of both LinkedIn and Microsoft. LinkedIn CEO Jeff Weiner remained CEO of LinkedIn, reporting to Satya Nadella, CEO of Microsoft. Reid Hoffman, chairman of the board, co-founder, and controlling shareholder of LinkedIn, and Weiner both fully supported the transaction.
Microsoft financed the transaction primarily through the issuance of new indebtedness. The acquisition was expected to have minimal dilution of around 1% to non-GAAP earnings per share for the remainder of fiscal year 2017 post-closing and for fiscal year 2018, based on the expected close date.
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LinkedIn will retain its independence
On June 13, 2016, Microsoft and LinkedIn announced a definitive agreement for Microsoft to acquire LinkedIn for \$26.2 billion, or \$196 per share in an all-cash transaction. This deal constitutes one of the most expensive tech acquisitions in history and the biggest acquisition in Microsoft's history.
Despite the acquisition, LinkedIn will retain its distinct brand, culture, and independence. Jeff Weiner, CEO of LinkedIn, expressed his support for the transaction and his enthusiasm for leading LinkedIn through the next chapter of its story. He will remain CEO of LinkedIn and will report directly to Satya Nadella, CEO of Microsoft.
The acquisition of LinkedIn by Microsoft is expected to bring about several benefits for both companies. Firstly, it allows Microsoft to leverage LinkedIn's massive network of over 400 million members, strengthening its position in the enterprise market segment and enhancing its social media presence. Secondly, the acquisition aligns with Microsoft's Dynamics Cloud business, particularly with the combination of Microsoft Dynamics and LinkedIn Sales Navigator, posing a direct challenge to CRM market leader Salesforce.
Additionally, LinkedIn's strong mobile presence, with 60% of its traffic originating from mobile devices, provides an opportunity for Microsoft to build on this strength and adapt it to its other enterprise assets, such as Office 365. By combining LinkedIn's network with Microsoft's cloud offerings, the companies aim to change the way the world works and empower every person and organization on the planet.
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The acquisition strengthens Microsoft's enterprise market position
Microsoft's acquisition of LinkedIn was a significant move in the tech industry, and it had a substantial impact on the enterprise market segment.
Firstly, the acquisition strengthened Microsoft's position in the enterprise market. Microsoft's core focus has always been on the enterprise space, and while they had been looking to build their social presence, their purchase of Yammer hadn't achieved the desired results. By acquiring LinkedIn, Microsoft gained access to its vast network of professionals, enhancing their social media presence and credibility.
Secondly, LinkedIn's alignment with Microsoft's Dynamics Cloud business created a powerful combination. Integrating LinkedIn Sales Navigator with Microsoft Dynamics posed a direct challenge to the CRM market leader, Salesforce. This integration also accelerated the growth of Microsoft Office 365, which had been a stated goal of the acquisition.
Thirdly, LinkedIn's strength in the mobile market complemented Microsoft's weaknesses. With 60% of LinkedIn's traffic originating from mobile devices, Microsoft could leverage this strength and adapt it to their other enterprise offerings, further solidifying their position in the enterprise market.
Additionally, LinkedIn's massive network of over 400 million members provided Microsoft with new opportunities. Despite criticisms of LinkedIn's slow growth in users and revenues, Microsoft recognised the value of this network and sought to leverage it more effectively. This included utilising LinkedIn's recent innovations, such as their enhanced mobile app and newsfeed, which had resulted in increased membership and engagement.
Overall, the acquisition of LinkedIn allowed Microsoft to strengthen its position in the enterprise market segment, gain social media credibility, enhance its existing products, and access a vast professional network with untapped potential.
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The transaction was approved by both boards
The merger between Microsoft and LinkedIn was a significant event in the history of both companies. On February 16, 2016, the CEOs of both companies, Jeff Weiner of LinkedIn and Satya Nadella of Microsoft, met to discuss ways to enhance their ongoing commercial relationship, and the idea of a merger was first proposed.
Over the following months, negotiations took place, with LinkedIn also considering offers from other companies such as Salesforce and Google. However, the Microsoft-LinkedIn merger gained momentum, and on May 14, 2016, the two companies signed a 30-day exclusivity agreement, prohibiting LinkedIn from soliciting other proposals. This agreement formalised the deal discussions and set a timetable for reaching a definitive agreement.
The negotiations involved various merger agreement stipulations, including a major discussion on the termination fee, which was initially set at $1 billion by Microsoft but was negotiated down to $725 million by LinkedIn. On June 10, 2016, LinkedIn emphasised the need for Microsoft to increase its offer, suggesting a deal could be reached at $196 per share in an all-cash transaction. The following day, June 11, 2016, Nadella agreed to these terms on behalf of the Microsoft board.
The transaction was indeed approved by both the Microsoft and LinkedIn boards, with the agreement being described as "unanimous". This approval was a critical milestone, as it paved the way for the final steps in the merger process. The merger was valued at $26.2 billion, inclusive of LinkedIn's net cash, making it one of the most expensive tech deals in history and Microsoft's biggest acquisition ever.
The merger was strategically beneficial for both companies. LinkedIn, with its vast network of professionals, had been undervalued by the markets due to criticisms about its growth in users and revenues. Microsoft, with its significant cash reserves, was in a position to make a strategic acquisition, strengthening its position in the enterprise market segment and enhancing its social media presence. The combination of Microsoft's cloud infrastructure and LinkedIn's network presented a unique opportunity to change the way the world works and connects.
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Frequently asked questions
The acquisition was valued at $26.2 billion, inclusive of LinkedIn’s net cash.
The first formal discussion between the two companies took place on February 16, 2016, when LinkedIn CEO Jeff Weiner met with Microsoft CEO Satya Nadella.
The acquisition of LinkedIn gave Microsoft access to its massive network of over 400 million members, strengthened its position in the enterprise market segment, and improved its mobile presence.
Yes, LinkedIn retained its distinct brand, culture, and independence, and Jeff Weiner remained CEO of LinkedIn, reporting to Satya Nadella, CEO of Microsoft.
