The Microsoft And LinkedIn Deal
Big businesses acquire new companies all the time, but Microsoft and LinkedIn are breaking new ground.
If you follow tech and finance news even relatively closely, you’ll know that news of big acquisitions happens every few months or so, with pundits and insiders weighing in on how various mergers will affect shareholders’ bottom lines.
When it comes to a tech giant like Microsoft, there are numerous technology properties the company could go after, and their most recent acquisition has been none other than the professional social networking site LinkedIn. With 433 million users and a name brand that nearly every internet user recognizes, LinkedIn was certainly a hot commodity to be snapped up. The stock for LinkedIn soared almost 50% after the announcement was made, and many observers called the acquisition one of the most valuable in Microsoft’s history.
Why LinkedIn?
From a logical and business point of view, Microsoft’s decision to go after LinkedIn makes sense. After all, with products like Microsoft Office – the Windows operating system popular with corporations – they have robust ties to big business. But when it comes to the LinkedIn point of view, it’s easy to wonder what exactly was the social media giant’s motive for being bought out. Sure, the price tag was hefty—$26 billion in cash—but in a sense the company was handing over operations to a different set of interests.
Owned But Not Controlled
In a statement about the acquisition, LinkedIn CEO Jeff Weiner seemed to be trying to assuage fears that the company was turning over all its power. He wrote: “In order to pursue our mission and vision, and to do so in a way consistent with our culture and values, we need to control our own destiny. At this point, some of you may be thinking this sounds completely counterintuitive: How will we be more likely to control our own destiny after being acquired? The answer lies in both the way in which the world has been evolving and the unique way in which this deal will be structured. Imagine a world where we’re no longer looking up at Tech Titans such as Apple, Google, Microsoft, Amazon, and Facebook, and wondering what it would be like to operate at their extraordinary scale — because we’re one of them.”
Indeed, the idea that LinkedIn will be able to retain “control over its own destiny” while still being bought out is a model that many tech mergers seemed to have followed with mixed results. This is not the first time that a company has followed the trajectory of hot new startup, cash injections, an IPO, and then being snapped up by one of internet’s biggest companies like Yahoo, Apple or Facebook.
Learning From Past Acquisitions
There are numerous examples of big internet acquiring popular companies, with varied outcomes. For example, Facebook acquired both WhatsApp and Instagram, the former in 2014, the latter back in 2012. WhatsApp was rumored to have somewhere in the realm of 300-400 million users at the time it was acquired; today, it has staggering usership of 1 billion, according to the company. Instagram’s usership is not public, but all signs point to the fact that it has grown since Facebook took over with better integration between the services.
On the other hand, Yahoo acquired the microblogging site Tumblr in 2013 for $1 billion. However, since the acquisition usership hasn’t grown much, and both users and analysts have pointed to the fact that the platform has not seen any major innovation. As Quartz recently reported, “Mayer had set an arbitrary but lofty revenue goal of $100 million that the unit failed to meet in 2015. In February this year, the company admitted having hugely overvalued Tumblr, writing down its value by $230 million.”
It’s hard to judge LinkedIn’s future by the success or failure of similar mergers, but if the platform can retain the identity that first made it successful as well as innovate moving forward, there’s a good chance that being acquired by Microsoft will be a boon rather than a curse.