Why Microsoft Bought LinkedIn for $26 Billion and Why We Should All Care

In its largest deal yet, Microsoft announced on Monday that it would buy LinkedIn for $26.2 billion, placing enormously high stakes on the bet that connecting its software offerings to the professional social networking website will bolster its revenue, growth and future.

The software giant currently has access to data on email contacts, meetings, schedules and calendars (Outlook), work life (Delve), contacts (Skype) and sales accounts (Microsoft Dynamics CRM). The acquisition of LinkedIn, one of the biggest technology M&A deals ever, gives Microsoft the opportunity to build out additional services for enterprises as it moves into enterprise social networking and professional content. Access to LinkedIn will give Microsoft a channel to sell more of its products, especially cloud apps like Office 365, Skype and Cortana, and there is immediate synergy for both companies in enhancing professional collaboration and communication. It also gives Microsoft access to an enormous amount of data.

Source: LinkedIn

“It’s really the coming together of the professional cloud and the professional network,” Microsoft CEO Satya Nadella said.

Connecting Office 365 to LinkedIn has a number of applications, including the potential ability for meeting attendees to learn about each other’s professional interests and backgrounds without leaving a meeting invite within their calendar. Lynda, the online learning and training software acquired by LinkedIn last year, could also serve as a catalyst for a Microsoft push into professional development services and products.

Additionally, LinkedIn will give Microsoft a significant boost in the social networking space, which Microsoft has struggled with despite an early investment in Facebook and the acquisition of Yammer in 2012. Microsoft was reportedly interested in acquiring Slack as well, the collaboration and messaging software for 8 billion as reported by TechCrunch earlier this year.

The acquisition also enhances Microsoft’s competitive position as a customer relationship management (CRM) provider. The data it gains from LinkedIn will boost its Dynamics offerings against its primary CRM competitor, Salesforce. In the future, sales representatives may potentially be able to gather useful background information on prospects and potential customers sourced directly from LinkedIn within the Dynamics CRM tool. The ability to directly link Dynamics with LinkedIn and make the wider social networking website’s profile data available to sales professionals in their databases is an especially interesting element of the deal. Anyone in sales or marketing can attest to the fact that personalization, customization and making the emotional connection are essential to winning new business and deals.

In addition to enhancing Dynamics and its CRM offerings, Microsoft is gaining access to LinkedIn's Sales Solutions and Sales Navigator product. Navigator is already a resource for sales professionals prospecting and working within the professional social network, but integrating the tool with CRM systems could make it even more valuable.

If Microsoft is able to integrate two businesses that have very few operational overlaps, but numerous professional development, collaboration and communication synergies, buying LinkedIn may prove to be one of the most successful and strategic M&A deals ever. It already seems poised to be a far more prudent move than when it spent $7.2 billion in 2013 to buy Nokia’s handset business, but there is also much more at stake with this acquisition. High risk, high reward.

References:

1. Reuters. ”Microsoft to buy LinkedIn for $26.2 billion in its largest deal.”
2. Time. “Why Microsoft Is Spending $26 Billion on LinkedIn.”
3. TechCrunch. “Microsoft to buy LinkedIn for $26.2B in cash, makes big move into enterprise social media.”
4. WSJ. “Microsoft to Acquire LinkedIn for $26.2 Billion.”
5. PCWorld. “Why Microsoft bought LinkedIn for $26 billion, in one word: Cortana.”
6. Forbes. “Here Are All The Businesses Microsoft Gets With Its $26.2-Billion LinkedIn Deal.”