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Why LinkedIn Sold Itself to Microsoft

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By Casey C. Sullivan, Esq. on June 13, 2016 1:05 PM

If you haven't heard yet, Microsoft announced this morning that it was buying LinkedIn for more than $26 billion. The all-cash deal will see Microsoft paying $196 a share, a 50 percent premium on LinkedIn's stock, in order to gobble up the internet's premiere resume-sharing social network.

But why would LinkedIn, a company that's often touted its independence and agility, sell itself to the 90's behemoth from Redmond? Here's why.

It's All About That Synergy

The sale was approved by LinkedIn CEO Jeff Weiner, as well as the company's founder and controlling stockholder Reid Hoffman. And according to Weiner and Microsoft CEO Satya Nadella, adding LinkedIn to the M.S. network was a perfect match.

"This deal is about bringing together the professional cloud and professional network," Nadella said in a telephone interview with The New York Times. "The mission statements of LinkedIn and Microsoft have different words, but are essentially [the] same," Weiner explained. After all, both are focused on professionals; LinkedIn on their social networks, Microsoft on their (increasingly cloud-based) software needs.

Weiner, who will stay on as CEO, claims to be unworried by Microsoft's massive size. "The Microsoft that has evolved under Satya's leadership is a more agile, innovative, open and purpose-driven company," Weiner wrote in a statement to employees. "It was the latter point that first had me thinking we could make this work, but it was his thoughts on how we'd do it that got me truly excited about the prospect."

And a Struggling Business

But LinkedIn has been struggling as well, a factor which certainly played into the sale. Despite being the world's largest, most successful professional social network, with more than 400 million users, LinkedIn's stock has been in a slow, steady, and dramatic decline. Having peaked at almost $270 in 2015, the stock had dropped to $131 by last Friday and was down 43 percent since last July. That is, until word of Microsoft's acquisition bumped the shares up nearly 50 percent today.

And, like so many other internet companies, LinkedIn has been struggling to find steady revenue. Its revenue from ad sales was small and growing smaller, while user growth was stalling out as well. All that combined to make LinkedIn a bit of a steal for Microsoft, who is certainly paying a premium, but much less than what the company was worth just a year ago.

Of course, the sale isn't a done deal just yet. The sale still has to be approved by LinkedIn's shareholders and regulators before Microsoft starts integrating your LinkedIn profile with your PowerPoint slides.

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