Microsoft To Acquire LinkedIn For $26.2 Billion

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Microsoft has announced that it will acquire LinkedIn for $196 per share, a 49.5% premium to LinkedIn's closing share price on Friday.

Microsoft Corp. (Nasdaq: MSFT) and LinkedIn Corporation (NYSE: LNKD) on Monday announced they have entered into a definitive agreement under which Microsoft will acquire LinkedIn for $196 per share in an all-cash transaction valued at $26.2 billion, inclusive of LinkedIn's net cash. LinkedIn will retain its distinct brand, culture and independence. Jeff Weiner will remain 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 support this transaction. The transaction is expected to close this calendar year.

According to Microsoft's press release, Morgan Stanley is acting as the tech giant's exclusive financial advisor, with Qatalyst Partners and Allen & Company advising LinkedIn.

What does everyone think of this deal? Out of curiosity, can anyone estimate the size of the fees for a deal like this? Particularly for Qatalyst and Allen & Co.

http://news.microsoft.com/2016/06/13/microsoft-to-...

Comments (45)

Jun 13, 2016

Also interested.

Jun 13, 2016

Honestly, I don't understand why they're acquiring it. Linkedin is a facebook for professionals. Instead of acquiring firms that can make their products better or have exclusive features they buy a website. I would agree if they bought it for a billion or two but 29 billion sounds wasteful. Might be something ordinary people can't see.

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Jun 13, 2016

So you are definitely against the price premium then? Haha

Jun 13, 2016

"Linkedin is a facebook for professionals."

You know Facebook had $1.5 billion in net income this last quarter, right? I know LinkedIn wasn't profitable in 2014 or 2015 (or the last quarter), but that doesn't mean it won't be one day. Just for disclosure, I didn't toss monkey shit at you and I don't think your comment was all that bad. I don't think it's a great investment either, but what do I know? It's just a dent in Microsoft's $105.5 billion of cash equivalents. I'm interested to see how it plays out.

Jun 13, 2016

I think its just Microsoft trying to consolidate power. Individualism in the valley is dying

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Jun 13, 2016

Very interesting. Bold move on Microsoft's end, but they can afford it. Will be interested to see if/how they integrate it with Office, which I assume is going to happen. Having integrated functionality with Outlook is one angle I could think of. Whether it'll end up being profitable, given their already dominant status in the corporate world, is debatable.

Jun 13, 2016

What type of integration are you thinking?

Jun 13, 2016

A letter from MSFT was posted stating that they want to change the way people work, by using LinkedIn's software to recommend people/resources to reach out to for a project you may be working on, for example.

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Jun 13, 2016

Outlook, Skype for Business, projects through SharePoint, etc. Not too sure, haven't given it a ton of thought.

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Jun 13, 2016

Allen & Co. part of a huge deal per usual, how do ppl even get jobs there?

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Jun 13, 2016

Damn, you're right. I'm looking at their Wikipedia right now, and they were underwriters for Google and Twitter's IPO, advised Facebook's acquisition of WhatsApp, and assisted Time Warner's $80B merger with Charter.

Jun 13, 2016

Know a guy summering there from Texas. Decent gpa, nothing stunning but he was from California.

Jun 13, 2016

Sounds like he has family high up in the firm. Nothing about Allen & Co. seems like they hire "decent"..

Jun 13, 2016

Know a guy there, he's mediocre, nothing special about his resume. Guessing just normal networking although I hear the bank keeps a very low profile

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Jun 13, 2016

msft is the polar opposite of aapl in that they rarely incubate ideas and instead try to purchase growth via M&A (per wikipedia, 196 acquisitions by msft vs aapl's 78). I think there are certainly potential synergies since microsoft office is already in most large enterprises (save the open source people of the world and design firms), so they're already plugged into the business community. it will be interesting to see how this pans out. I've had my doubts about social media but microsoft is a well-run company, and it wouldn't shock me if they made this work well.

total fees

$10 to 20 million to Morgan Stanley
$40 to 45 million to Qatalyst and Allen & Co.

new poll: over/under on yield for these bonds? if they're 10y debt, I'll set it at 2.25.

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Jun 13, 2016

How did you estimate the fee figures?

Jun 13, 2016

buddy of mine works at one of the firms and confirmed what I read on BI

http://www.businessinsider.com/wall-street-banks-a...

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Jun 13, 2016

The price means little to me, but the potential for Microsoft and LinkedIn integration is fantastic. Being able to link LinkedIn and Outlook accounts alone allows for so many possibilities.

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Jun 13, 2016

But if they were to maintain 'independence and the original culture', would Microsoft urge LinkedIn engineers to divert resources away from their current operations to pursuing MS oriented tasks?

Jun 14, 2016
CRE:

The price means little to me, but the potential for Microsoft and LinkedIn integration is fantastic. Being able to link LinkedIn and Outlook accounts alone allows for so many possibilities.

You could link multiple email addresses (personal + work) to one linked In account in the past but it was painful. Agreed the synergies likely coming from linking up with outlooks address features will be awesome.

Jun 13, 2016

Complete waste of money, but Reid Hoffman now has taken the money and ran like that fat face guy from shark tank and isn't just rich on paper (and subsequently poor on paper) like that theranos chick

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Jun 13, 2016

I've been doing quite a bit of research on Allen & Co since posting. Their profile is pretty insane!

Jun 13, 2016

damn the guys on the sell side of this stuff.... who's this allen guy ?

Best Response
Jun 13, 2016

Allen & Co. hires connected kids. That tends to be the clean, fresh-faced kids from good families who go to good schools. This isn't the scrappy hardworking second-generation kid who broke his back to get into Princeton. It's also not the old money like the Brahmins or families from the Social Register.

It's the kid whose family has been going to Stanford or UVA for four generations. The ones who come from quietly strong political families in Arizona, New Mexico, and California; who went to Andover, Choate, Thacher, Webb, and instead of going with their classmates into the Ivies, went back to the flagship state school (U of Arizona) because great-great-granddaddy was one of the first student body presidents ever before going on to be a senator or ambassador or something.

What I'm trying to paint here is that a lot of really qualified kids who sent in an application after finding out the firm's strong dealflow and reputation are always mystified how they never got an interview there while they wound up with offers at GS, Evercore, and JPM.

It's less about 'who are the very best interns we can hire' and more about 'who comes from the right people' and 'how can we get the kids who will best fit'. Since like attracts like, it's very often the sons and daughters of past or present employees, clients, or people otherwise economically or politically connected to the firm.

From what I've seen (on resumes from summers trying to lateral for full-time) and heard, summers don't get really technical work; it's a real resume-builder in that the firm's name carries a lot of weight and chances are you can put a headline deal in your bullet points, but the exposure you get is often qualitative and on the strategic advisory side rather than the execution side.

The ones who succeeded trying to lateral (e.g. the girl who went to BX [PJT] after summering there) self-taught modeling and/or were able to really spin their story favorably.

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Jun 13, 2016

+1, as usual a highly informative (and long) post from @APAE

Jun 13, 2016

This is actually an incredibly compelling acquisition as it pertains to a) the Microsoft Dynamics CRM platform and b) the standard Microsoft Office suite. Dynamics is compelling because it provides a social aspect and much higher user engagement level than your standard CRM platform and gives Microsoft a clear differentiation to the other CRM offerings (Salesforce, Oracle, SAP, etc.). There's much less of an economic value with Office since it's already the dominant productivity tool for enterprises, but nonetheless adds a ton of value, especially around Outlook contacts.

From a financial perspective, the deal is cheaper than the 48% premium implies. Remember that LNKD was trading in the $250-260ish range just 6 months ago and deal looks to be about ~5.9x EV / FY17 revs, which is not crazy by any means in the tech world. By comparison Zillow trades at 5.8x, FB at 9.2x, and NFLX at 5.0x. Final point is that cash is cheap for Microsoft also - they already priced $13bn of IG bonds (AA+) in late 2015 and shouldn't have any problems pricing new debt, especially given the oversubscription of the Dell / EMC bonds.

Overall, a potentially transformative deal at an acceptable price point for a company with a strong history of good execution (albeit less so lately).

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Jun 13, 2016

Compared to FB, monetizing on ad revenue is going to be tough for LNKD. The time spent on idle entertainment is not as intense as is on FB because it's a professional network. I can't see LNKD having 20B in sales. So you're right, a 'transformational deal' was probably a smart move.

Jun 13, 2016

Oh definitely smart move from a LNKD perspective. I think it's clearly indicative that they were going to have trouble meeting or exceeding the Street's growth expectations and the transformation from a high growth company to a profitable one is always much much harder than it is at face value.

Also good because now ad revenue becomes much less of a priority (which was originally supposed to be the main driver of revenue growth, as 90% of revenue comes from corporate solutions) and they can focus on building out their increasingly comprehensive suite of offerings that will complement dynamics CRM and office 365.

Jun 13, 2016

It's kind of crazy, thinking that Microsoft is buying Linkedin, it makes sense for LKND to sell, though I thought it would have been GOOG or FB - also the company cultures are similar. MSFT used to struggle a few years back, when I recruited for tech jobs last few years and interviewed at MSFT, LKND (oddly I didnt get this), GOOG and a few startups... it was between GOOG and MSFT and GOOG came out on top. But oddly MSFT (and JNJ) are the only AAA today.

Jun 13, 2016

Maybe not for long though...Moody's put them on notice

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Jun 14, 2016

At least they didn't buy it at its peak.

Jun 13, 2016

I predict a 15 bil goodwill write off in 2 years

Jun 14, 2016

I just recovered my losses!

Probably as a standalone company, $26 bn isn't too much. But they probably going to stir the pot so will see if they extract synergies or just make a mud pie.

Better than Nokia purchase, or GOOG's Motorola patient purchases.

Jun 13, 2016

http://www.bloomberg.com/news/articles/2016-06-13/...
I thought I'd share this interesting article regarding Microsoft's tax situation.

Jun 18, 2016

I literally can't wait to whip up power point slides of my life for my linkedin profile

I'm literally dying to model up an excel DCF of my expected future earnings and throw that on my linkedin page

My pants are literally getting moist

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Jun 18, 2016
  1. Microsoft isn't paying cash for LinkedIn.
  2. People are severely underestimating the value of LinkedIn's data. This was as much a data play by Microsoft as it was a social networking/advertisement play.
Jun 13, 2016
  1. Microsoft isn't paying cash for LinkedIn.

Yes it's worse - they are borrowing money for it. Hoffman is getting cashed out and can take the money and run, he sold a money losing website to the greater fool.

  1. People are severely underestimating the value of LinkedIn's data. This was as much a data play by Microsoft as it was a social networking/advertisement play.

Yes it is "play" I.e fooling around and not being a serous business

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Jun 18, 2016
Pio nono:

1. Microsoft isn't paying cash for LinkedIn.

Yes it's worse - they are borrowing money for it. Hoffman is getting cashed out and can take the money and run, he sold a money losing website to the greater fool.

2. People are severely underestimating the value of LinkedIn's data. This was as much a data play by Microsoft as it was a social networking/advertisement play.

Yes it is "play" I.e fooling around and not being a serous business

I think I agree with Pio here, linkedin has seemed to decline since every university of phoenix grad joined to land an 80k job with a Starbucks barista background. much of the updates i see now are rehashed facebook motivational garbage.

What this means to me is the original vision of linkedin has given way to more social media than social networking and will try to go up against facebook as ads targeting people with a job, ie greater discretionary income.

i don't see recruiting being worth it as indeed.com appears to be much more effective and facebook could easily match connections/jobs if this segment was valueable.

with this i don't see the price paid for admission worth it.

If the glove don't fit, you must acquit!

Jun 18, 2016
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Jun 13, 2016
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