Microsoft to acquire LinkedIn for $26.2bn

August 2016 | DEALFRONT| MERGERS & ACQUISITIONS

Financier Worldwide Magazine

In one of the most expensive tech deals in history, Microsoft Corporation and LinkedIn Corporation announced a definitive agreement which will see Microsoft acquire LinkedIn for $26.2bn, inclusive of LinkedIn’s net cash.

The deal, which will see the multinational technology company pay the professional networking website $196 per share in an all-cash transaction, is also the biggest acquisition in Microsoft’s history.

Microsoft, the leading platform and productivity company for the mobile-first, cloud-first world, will finance the transaction primarily through the issuance of new debt. Upon closing, Microsoft expects LinkedIn’s financials to be reported as part of Microsoft’s Productivity and Business Processes segment.

Moreover, Microsoft has stated that it expects the deal to have minimal dilution of 1 percent 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, and become accretive to Microsoft’s non-GAAP earnings per share in Microsoft’s fiscal year 2019 or less than two years post-closing.

Non-GAAP includes stock-based compensation expense consistent with Microsoft’s reporting practice, and excludes expected impact of purchase accounting adjustments as well as integration and transaction-related expenses. In addition, Microsoft also reiterated its intention to complete its existing $40bn share repurchase authorisation by 31 December 2016.

Following completion of the transaction, it is understood that Jeff Weiner will remain CEO of LinkedIn and will directly report to Satya Nadella, CEO of Microsoft. In addition, LinkedIn will retain its distinct brand, culture and independence.

“The LinkedIn team has grown a fantastic business centred on connecting the world’s professionals,” said Mr Nadella. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics, as we seek to empower every person and organisation on the planet.”

As the world’s largest and most valuable professional network, LinkedIn has, over the past year, launched a new version of its mobile app that has led to increased member engagement; enhanced the LinkedIn newsfeed to deliver better business insights; acquired a leading online learning platform called Lynda.com to enter a new market; and rolled out a new version of its Recruiter product to its enterprise customers.

These innovations have resulted in increased membership, engagement and financial results, specifically: (i) 19 percent growth year over year (YOY) to more than 433 million members worldwide; (ii) 9 percent growth YOY to more than 105 million unique visiting members per month; (iii) 49 percent growth YOY to 60 percent mobile usage; (iv) 34 percent growth YOY to more than 45 billion quarterly member page views; and (v) 101 percent growth YOY to more than 7 million active job listings.

“Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works,” said Mr Weiner. “For the last 13 years, we’ve been uniquely positioned to connect professionals to make them more productive and successful, and I’m looking forward to leading our team through the next chapter of our story.”

Acting as exclusive financial adviser to Microsoft is Morgan Stanley, while Simpson Thacher & Bartlett LLP is acting as legal adviser. For LinkedIn, Qatalyst Partners and Allen & Company LLC have been acting as financial advisers, with Wilson Sonsini Goodrich & Rosati acting as legal adviser.

The Microsoft/LinkedIn transaction has been unanimously approved by the boards of directors of both organisations and the deal is expected to close in 2016 subject to approval by LinkedIn’s shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.

Fraser Tennant