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Blog - Published 15th June 2016

Is Microsoft’s LinkedIn purchase the start of something special?

Microsoft buys LinkedIn

It was interesting to see Jeff Weiner’s comments accompanying his company’s (LinkedIn) sale to Microsoft, subject to the necessary Shareholder’s Agreement. We should remember here that it is Jeff’s entity, albeit he will retain the role of Chief Executive, that was being bought out, as his accompanying statement talked about vision, culture and strategy, and perhaps that is why he is undoubtedly crucial to the ongoing combined operation.

Securing the future of LinkedIn?

In his statement, which as I said talks very positively about the future of LinkedIn, it also, as you would expect with such a visionary, predicts, pre-empts and responds to what is going on in the business world around it when it talks about automation as he refers to in yesterday’s statement.

What is Microsoft really buying?

Peter Noyce, Business Services Partner at Menzies LLP, in discussion with his client Sarah Jeffs of Mixxit Media stated;

“We should though not forget what the key component is that Microsoft have actually purchased, and that is data.  We (most people reading this article) are all the pawns and nuggets in this deal.  It is a lesson for us all that the value is not always about turnover, profits/losses or cash generated, but at times something (in this case, data) that a ‘special purchaser’ wants.”

LinkedIn’s data is not just comprehensive, and let us not forget we populate this data (historically and continually) but it is also up to date; no cleansing project required here by Microsoft, a massive plus which will resonate with anyone who has had the job of cleaning databases!

Not only do they know where you have worked, where you are now and, depending upon searches, where you may be headed next, but also your business specialisms and expertise (via LinkedIn groups). As I said earlier, we are all the “special” commodity in this “special” purchase value.


Is there something more to this?

You bet! In terms of what LinkedIn can do for Microsoft, there are a number add-ons and integrations which will certainly sweeten the deal as Microsoft looks to regain ground lost to likes of Salesforce.

In a recent article in TechCrunch, Ingrid Lunden outlines how the partnership could open up a range of overlapping marketing and targeting opportunities to Microsoft including:

An enhanced CRM platform

LinkedIn’s own Sale Navigator coupled with Microsoft’s own Dynamics CRM will look to “to transform the sales cycle with actionable insights” — think Big Data to support find leads, start conversations and close deals.

Online professional learning

LinkedIn’s previous purchase of Lynda.com – a leading online learning platform – which already integrates against user profiles will allow Microsoft to introduce and educate a vast online business community (estimated at 43 million by Statista.com) in the ways of their existing and new product lines. That’s some powerful direct marketing tool.

Microsoft’s and LinkedIn’s vision for the opportunity ahead

LinkedIn/MSFT deal by TechCrunch


What about the deal itself?

No doubt the corporate finance players reading this will be rolling their eyes and dreading the phone ringing with tech/data companies deciding that they are also ‘special’, with aspirational (being polite there) belief in their own value. The answer should be to look at what LinkedIn has built. This is not a start-up venture but an income generating, robust business and has a platform that works for the millions of users and people who would wish to access this data, not just to Microsoft, who are now obviously in prime position to compliment and sell on their own products and services.

This models future cash flow estimates, based upon the risk profile of the business and assesses what the value of those cash flows is today. It is not unusual to see very high valuations for technology companies that seem entirely unsupported by current earnings, you only have to consider the early stage valuations of Facebook as an illustration. Clearly Microsoft anticipate that LinkedIn has great future growth potential and this has been reflected in the price that they have been willing to pay.”

So what’s in it for LinkedIn users?

Well it’s too early to tell, but I believe the acquisition by Microsoft is just the injection and catalyst for the next phase along the LinkedIn platform evolution. It already has its substance and, whilst a bold move by Microsoft, is certainly an excellent long term fit for both.

Comments supplied by Menzies Partner, Peter Noyce who is part of Menzies Business Services sector team.

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Peter Noyce - FCA

Partner

Peter Noyce is a Menzies Partner in the Woking office specialising in legal firms, business advisory services & financial solutions focused on profit improvement.