Case Study: Linkedin Acquisition

LinkedIn Acquisition

1. What in your assessment are the most significant reasons driving Microsoft's purchase of LinkedIn? (250 words max)

Ans 1)

1. Focus on enterprise software space: Microsoft has many in this regard ranging from Windows, Office 365, and Office Suite. Microsoft has utilized assets such as their surface tablets and Skype Communications into professional use-cases like Hololens. LinkedIn will offer an opportunity to Microsoft for employee recruitments, important data and valuable insights into its customers. A powerful advertising network including Lynda and Slideshare are also on the offer.

2. LinkedIn Network’s Power: LinkedIn is a very valuable social network, an asset without a challenging peer. LinkedIn has a huge network

Does the acquisition make strategic and financial sense? Provide a concise explanation in support of your assessment. (250 words max) Ans 2)

Microsoft must have valued LinkedIn over $26 billion. This is more than 8 times the LinkedIn revenue of last 12 months ( $3.2 billion).The ratio is ~5 times Trailing twelve months for public companies on market places shows that price paid/valued by Microsoft is premium. However it is important to note that this is the best time for Microsoft to purchase LinkedIn (as the market cap is 60% of what it was compared to last year and it reached lowest in February 2016).There are half a billion users whose professional data and behavior is up for sale and Microsoft gets it in the right time.

The growth is number of LinkedIn users is close to 19% annually and additional 9% growth in new users every year. Experts also project higher mobile usage (up to 60%, which grows by 49%). There are almost 45 billion quarterly member page reviews and more than 100% growth in active job listings.

There can be many financial models for valuing LinkedIn with each approach yielding another value, Microsoft however deemed $26 Billion as

Not make too many changes: Microsoft should retain LinkedIn CEO, Jeff Weiner. The leadership consistency is necessary and looks good. Microsoft will be benefitted with a familiar leader who understands company’s objectives. A new team at the beginning will make the employees nervous and down on morale. Change should be managed well.

2. Microsoft would do well to take a lesson from Yahoo-Tumblr, when the expectation of Yahoo were very high and that reflected in public domain. They should refrain from making bold public announcements to not reduce the morale of LinkedIn employees. Financial results should not be over-reacted and proper research should be conducted for performance

3. Microsoft can create a connection directory utilizing its outlook e-mails, LinkedIn enrolments, skype video chats. The directory can include al connections (direct/future/mutual contacts). Basic objective of this exercise is to optimize search and improve the quality of search. Recruiters could get what they are looking for. In-fact they could market it in those lines “Get what you’re looking for”

4. LinkedIn must focus and Augment organic growth and Microsoft must on invade LinkedIn and allow to be an independent