Microsoft’s savvy move to acquire LinkedIn at US$26 billion in June 2016, making it one of the highest value technology deals, is observed with both skepticism and optimism. On the one hand, the deal is being called a ‘natural fit’, as LinkedIn dovetails with Microsoft’s evolving corporate strategy, while on the other hand, Microsoft’s checkered history with acquisitions questions the acumen behind the huge price tag. Nonetheless, the acquisition will give Microsoft an opportunity to establish foothold in the social networking platform and professional content as well as expand its reach to 433 million LinkedIn users.
There is definitely a synergy between the two companies and their products, particularly, Microsoft’s Office productivity suite and LinkedIn’s professional profiles. LinkedIn users are the core demographic for Microsoft’s products. Microsoft could monetize the investment in LinkedIn by leveraging access to such enormous amount of data to sell its products.
The key reason for the acquisition was a shift in Microsoft’s business strategy to focus on building a social media presence, while LinkedIn’s growth slowdown was a motivation to agree to the deal. Together these companies plan to integrate their products to capture a larger market share – for instance, the plan is to align Microsoft’s Dynamics CRM and LinkedIn’s Sales Navigator to enhance presence in the social selling market.
The merger of two prominent global companies is likely to impact various industries and stimulate possibility of Twitter acquisition. The deal could impact B2B marketers, SEO companies, and recruitment industry.
LinkedIn wanted to be acquired due to its ailing stock performance and growth, and Microsoft was the best fit. LinkedIn’s acquisition was a good move from shareholder’s perspective, and the association with Microsoft might open avenues for LinkedIn to compete against Facebook and Google.
Acquiring LinkedIn is part of Microsoft’s masterplan to combine professional cloud and professional network using LinkedIn’s database of corporate users. The world’s largest software maker, Microsoft, has to now compete with Google and Apple mandating the need to shift to mobile devices, cloud, and social network. LinkedIn gathers in-depth information on its users including employment history, education, and user’s connections. This data is very useful for Microsoft, as it plans to manage relationship with customers and compete with Salesforce (an American cloud computing company).
However, questions are being raised on Microsoft’s ability to preserve LinkedIn’s value and grow both companies. Microsoft’s acquisition history is tinted with deals such as Skype, Nokia, and Yammer, all of which are not runaway success stories. For instance, Microsoft registered write-downs exceeding US$ 9.4 billion, which it paid to acquire Nokia in 2014. Further, the financial viability of the deal is being challenged as Microsoft paid an equivalent of US$ 260 for each monthly active user of LinkedIn. To keep its shareholders happy, it will either have to add more users to LinkedIn’s network quickly or devise a clear strategy to earn money from LinkedIn’s data.
Nevertheless, at this initial phase it is difficult to assess whether the deal is a success or failure for both companies. The actual worth of the deal can only be unmasked when the two companies begin to align their offerings and start devising a combined corporate strategy to compete in the market.