Investment about its members to recruiters and sales professionals.

Investment Banking

 

 

 

 

 

 

 

 

 

 

                                                                                                                  
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MICROSOFT
ACQUIRES LINKEDIN

TABLE
OF CONTENTS
INTRODUCTION.. 4
    
Microsoft 4
LinkedIn. 4
DETAILS OF THE DEAL. 5
Background of the deal 5
About the Deal 5
Financial advisors……………………………………………………………………………….. 6
Approvals………………………………………………………………………………………………………….6 
Reasons for the Deal 7
FINANCIALS OF THE DEAL……………………………………………………………………….. 8
    Impact
on the share prices ……………………………………………………………………………….9
OPINION OF THE DEAL……………………………………………………………….. ………….10
 
 

 

 

 

MICROSOFT

 

·        
Microsoft
Corporation is an American multinational technology company with
headquarters in Redmond, Washington. It develops, manufactures, licenses,
supports and sells computer software, consumer electronics, personal computers,
and services.

·        
It
was founded by Bill Gates who quit school to co-found Microsoft.

·        
Since
its IPO on March 13, 1986, Microsoft’s stock has risen more than 90,000%.

·        
The
company also publishes books and multimedia titles, produces its own line of
hybrid tablet computers, offers e-mail services, and sells electronic
game systems,
computer peripherals (input/output
devices), and portable
media players.

·        
It
has sales offices throughout the world. Microsoft operates research labs in
Cambridge, England (1997); Beijing, China (1998); Sadashivnagar, Bangalore,
India (2005); Santa Barbara, California (2005); Cambridge, Massachusetts
(2008); New York, New York (2012); and Montreal, Canada (2015).

·        
In
2000 company cofounder Gates relinquished his role as CEO of Microsoft
to Steve Ballmer. He handed over the title of chief software architect in
2006 to Ray Ozzie.Ozzie stepped down in 2010, and longtime Microsoft
executive Satya Nadella replaced Ballmer as CEO in 2014.

 

LINKEDIN

 

·        
LinkedIn
is a social network for professionals launched on May 5, 2003

 

·        
 It
is for anybody and everybody who wish to look for new opportunities to grow
their careers and to connect with other professionals.

 

·        
As of
2015, most of the company’s revenue came from selling access to
information about its members to recruiters and sales professionals. As of
April 2017, LinkedIn had 500 million members in 200 countries, out of which
more than 106 million members are active

 

·        
LinkedIn
is headquartered in Sunnyvale, California, with offices in Omaha, Chicago, Los
Angeles, New York, San
Francisco, Washington
DC, Sao Paulo, London, Dublin, Amsterdam, Milan, Paris, Munich, Madrid, Stockholm, Singapore, Hong Kong, China, Japan, Australia, Canada, India and Dubai

 

·        
LinkedIn’s CEO is Jeff Weiner

 

 

 

 

                                                                                                                                                               
DETAILS
OF THE DEAL

 

     BACKGROUND:

·        
Right
from March through June, LinkedIn was in talks with four companies for its
takeover but only Salesforce and Microsoft were seeking a full-on acquisition

·        
Salesforce
actually had the highest bid of $200/share but LinkedIn mentioned that its
board considered several factors before locking the deal with Microsoft,
including the fact that a Salesforce bid would have required approval of that
company’s shareholders, as well as the fact that Microsoft only cash whereas
Salesforce was offering stock plus cash

ABOUT THE DEAL:

 

·        
Microsoft
Corp announced the acquisition of LinkedIn Corp for $196/for $26.2bn      including LinkedIn’s net cash.

·        
 The transaction was announced on 13/6/2016 and
was completed on 8/12/2016. As per the contract, LinkedIn CEO Jeff Weiner would
the remain CEO of the professional social network and would report to  the Microsoft CEO Satya Nadella. LinkedIn
would sustain its “distinct brand, culture, and independence.”

·        
The
deal is the largest deal by Microsoft Corp .

·        
The
deal was completed in 178 days. The nature of the bid was friendly. Under the
contract of the deal LinkedIn had to pay termination fees of $725m

 

 

         

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL
ADVISORS

TARGET:

1.     
Allen
& Co.

2.     
Qatalyst
& Co.

ACQUIRER:

1.     
Morgan
Stanley

 

APPROVALS:

·        
The
deal was approved by the board of directors of bith the acquirer and the taget
on 13/6/2016.

·        
Target
shareholders approved the deal on 22/8/2016

·        
Further,
the deal required the approval of EC and Competition Commission as well.

·        
The EC examined whether
Microsoft could use its strong market position in operating systems (Windows)
for personal computers (PCs) and productivity software to strengthen
LinkedIn’s position among professional social networks.Hence it gave an
approval after 176 days i.e on 6/12/16

 

                                                                                                                         

 

 

 

 

 

 

 

REASONS
FOR THE DEAL:

 

 Satya Nadella listed  a specific set of integration scenarios which
led to the deal in the first   place:

·        
LinkedIn
identity and network in Microsoft Outlook and the Office suite

·        
LinkedIn
notifications within the Windows action center

·        
Enabling
members drafting resumes in Word to update their profiles, and discover and
apply to jobs on LinkedIn

·        
Extending
the reach of Sponsored Content across Microsoft properties

·        
Enterprise LinkedIn
Lookup powered by Active Directory and Office 365

·        
LinkedIn
Learning available across the Office 365 and Windows ecosystem

·        
Developing
a business news desk across our content ecosystem and MSN.com

·        
Redefining
social selling through the combination of Sales Navigator and Dynamics 365

 

 

 

 

 

FINANCIALS
OF THE DEAL:

 

·        
The
deal was an all cash deal of $26.2bn.

·        
 Microsoft raised $US19.75 to help finance its
planned purchase of LinkedIn . There was a strong demand for
Microsoft’s shares that aided them to borrow at lower rates as compared to its
previous bond issue.

·        
S Global Ratings assigned the
bonds the top AAA grade in a note reviewing the sale on Monday. Moody’s
Investors Service also gave the bonds its top grade. Bank of  America , JPMorgan Chase & Co. and Wells
Fargo & Co. managed the bond sale.

 

 

IMPACT ON THE SHARE PRICES:

·        
The
share price of the target i.e LinkedIn went up from 125.15 to 193 which is a
jump of  47% on the announcement of the
deal.

·        
On
the other hand, Microsoft’s stock declined by 3.2%

·        
Microsoft
paid a premium of 49.38% and closed the deal at 196/share.

·        
There
is a positive gross spread which indicates the exponent by which the deal was
overvalued

·        
The
graph displays how the share price of Microsoft recorded its highest after the
deal was completed. This indicates positive market sentiments

 

OPINION
OF THE DEAL:

 

There
are a few reasons which point out towards the fact that the deal may not be a
favorable one.

·        
The
Industry of social networking is not very lucrative. This can be seen from the
fact that LinkedIn being the market leader made a loss of $166m

·        
The acquisition
may not be a profitable one for Microsoft and one of the reasons for the same
is that Microsoft is overpaying for the deal. A look at comparable deals
validates  this fact 

  

·        
LinkedIn’s
share price had dropped by 40%  and its
financial statements had revealed  that it made a
net loss of around $165m in 2015, despite revenues of $3 billion, in large part
because of excessive stock-based compensation.

·        
However,
there are some benefits too that LinkedIn can provide to Microsoft. The
social-network firm has a great team of data scientists which is a must for
tech firms. LinkedIn gathers elaborated information about its users that  comprises of their employment history,
education and whom they know. This can create a great value for Microsoft since
their aim is to manage relationships with their customers by providing them
offerings. This can help to create a competitive advantage against Salesforce,a
potential competition

·        
Microsoft
has seen its share of failure when it had acquired Skype in 2011 for $8.5
billion, aQuantive $6.3bn and  Nokia’s
handset business in 2014 for $7.6 billion. However , Microsoft has earned
$1.1bn from LinkedIn in the previous quarter which is a sign that Microsoft’s
acquisition has finally bore fruits