Compared to earlier this year and certainly in comparison to the 2015, activity in mergers and acquisitions (M&As) have been more subdued lately. However, one particular acquisition has grabbed headlines not just for the sky-high value of the deal but also because it involves one of America's corporate giants, tech firm Microsoft (MSFT).
Microsoft Goes Big
There was some surprise circulating around the financial news after Microsoft announced its $26.2-billion acquisition of the professional networking company LinkedIn (LNKD) on Tuesday. The social media website is perhaps the top resource for employers looking for prospective hires. LinkedIn boasts 433 million registered users worldwide (over 200 different countries).
In the wake of the deal, the share price for LinkedIn quickly shot up 64%, coming in line with the $196-per-share valuation from Microsoft's offer. Both companies have approved the acquisition through their corporate boards; the only hurdle that remains is regulatory approval. As part of the agreement, LinkedIn will retain its name and individual branding.
Like many of its tech counterparts, Microsoft has over $100 billion in free cash and is using it for expansion. This is not the first big purchase Microsoft has made in recent years, but its previous moves didn't work out very well: it bought the now-struggling Finnish telecom firm Nokia (NOK) for $9.4 billion and spent $6 billion on the obscure aQuantive. It also reportedly had interest in buying communication platform Slack for $8 billion but never consummated the deal.
Some pundits scratched their heads at the connection between the two companies. From Microsoft's perspective, by building its business network through LinkedIn, the company can save thousands of dollars a month on its internal recruiting efforts alone. Satya Nadella, Microsoft’s CEO, remarked that, "This deal is all about bringing together the professional cloud and professional network."
Moreover, such an extensive professional network helps grow its sales channels, as well. Both firms hope that LinkedIn's customer relationship management (CRM) infrastructure will also be beneficial. According to analysts, this also is more evidence that Microsoft is willing to shift from its traditional PC business to more cloud-based services.
The deal comes as a bit of a saving grace for LinkedIn, which lost money last year and has had trouble continuing to grow. Interestingly, Microsoft nearly bought LinkedIn a decade ago for a mere $250 million, but the deal fell through—much to the financial enrichment of the latter. Still, the price tag is probably half of what it would have been last year, when shares of LNKD were trading at $260.
Other M&A News
In other notable news in mergers and acquisitions, cybersecurity firm Symantec (SYMC) bought Blue Coat Systems Inc. (BCSI), another related company in the enterprise security industry. The deal is reportedly worth $4.7 billion. Symantec is best-known for being the company behind the popular Norton antivirus software. This is another step in the firm's shift from consumer products to more enterprise-oriented cybersecurity solutions.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.