Friday, August 5, 2016

Couple of weeks ago, the Silicon Valley news was buzzing with how Microsoft paid $26.2B for linkedin in cash.  Many people said that Microsoft paid too much.  Apparently the Motley Fool advised everyone to sell their Linkedin shares!?!  Normally what happens when and M&A goes through is the purchasers shares drop in value;  specially in an all cash deal.

Anyway, I am writing this article before talking to a friend who is an expert on M&As, because... well just because!  As for MS paying too much for linkedin, the answer depends on what they plan to do with it.  Imagine a Linkedin, that has Skype built into it, or one that is emphasizing CRM rather than just recruiting.  That linkedin can easily, and I mean easily, rival and compete with Salesforce.  Linkedin, is in many way, plus or minus a few things.  Not to mention that now Google is left orphaned, even more so, in the Social Network Game after Page effectively killed Google Plus.

But back to the merger, NYTimes did an amazing article on the timeline of the sale :-)  IMHO, it has to be amazing; it is NYTimes ;-)

As the article points out, Linkedin was not bought, it was sold!  The CEO of Linkedin approached the CEO of MS about a merger and discussions began.  Then the deal got shopped around, and Salesforce was the second contender competing with MicroSoft to buy out Linkedin.  As I am writing this, I am even more convinced that Salesforce saw the threat and tried to preempt it!  Otherwise, what need did Salesforce have for Linkedin, given that Salesforce already has a huge amount of data on people, just through, formerly  Lets also not forget Microsoft's competition with Oracle.

So now the game is on.  If Microsoft decides to stick just to the recruiting market for Linkedin, then they play the same old game that Reid Hoffman and the gang were playing and getting into a saturated revenue model.  But if Microsoft does marry Linedin with its other units covering CRM, communication, etc, then it will be a force to be reckoned with.

As for who is the ultimate winner in all this:  Reid Hoffman.  This dude, and I am calling him dude respectfully and affectionately, must be absolutely Brilliant (with a capital B).  He knew that recruiting is a huge but a volatile market, and there were technological forces beyond his control that were breathing down Linkedin's neck (my own Textnomics being one -- he said wishfully).  Hoffman knew that being yet another resume database was just it, another resume database.  He knew all the hype about Linkedin dominating the recruiting market, was a good hype to have (specially when the P/E ratio and the EBITDA did not support it).  He not only sold the company at top dollar, he got himself on the board of MicroSoft.  Just for having Hoffman on the board alone, I think MicroSoft made a good deal.  Now MicroSoft has a dream representative/VC in Silicon Valley.

Good luck to all parties involved. I am getting the popcorn to see how all this plays out :-)

Here again is the timeline according to NYTimes .