The Deal: Microsoft Buys LinkedIn

On Thursday, the technology industry is still digesting the biggest acquisition in Microsoft's history: the company agreed on Monday to buy LinkedIn for twenty-six point two billion dollars in cash. The deal values every one of LinkedIn's four hundred and thirty million members at more than sixty dollars, and it joins the world's largest professional cloud with the world's largest professional network. The acquisition is the June 2016 story, and the story is the lesson: the companies that own the data about who works where, and who knows whom, are the companies that will own the future of work.

The Deal is the subject of this article: what Microsoft bought, why it paid so much, how the deal fits the company's strategy, and what it means for the professional world. The agreement was announced on Monday, June 13, and the price was one hundred and ninety-six dollars per share, a fifty percent premium over the previous close. This is the story of the deal, and the story is about the marriage of the professional graph and the office cloud.

1. The Announcement

The announcement came on a Monday morning, and it was the kind of news that stops the industry. Microsoft and LinkedIn said they had entered into a definitive agreement under which Microsoft would acquire LinkedIn for twenty-six point two billion dollars in cash, or one hundred and ninety-six dollars per share. The price was a fifty percent premium over LinkedIn's closing price on Friday, and the premium was the measure of how much Microsoft wanted the company.

The deal was the largest acquisition Microsoft had ever made, surpassing the eight and a half billion dollars it had paid for Skype in 2011. The size of the deal was the first signal of the ambition, and the ambition was the story: the company that had built its fortune on software for the workplace was buying the network where the workplace happens. The announcement was the beginning, and the beginning was enormous.

2. The Network

LinkedIn was the professional network of the world, and the network was the prize. The company had been founded in 2002 and had gone public in 2011, and by 2016 it had grown to four hundred and thirty million members, the people who work, the people who hire, and the people who get hired. The members shared their profiles, their skills, their connections, and their careers, and the data was unlike anything else in the world.

The network was not just a directory; it was a living map of the professional world. The members updated their profiles when they changed jobs, endorsed each other's skills, posted about their industries, and searched for opportunities. The network knew who worked where, who knew whom, and who was looking for what. The network was the data, and the data was the treasure.

3. The Strategy

The strategy behind the deal was explained by Satya Nadella, the chief executive of Microsoft, and the explanation was about the professional graph. He said the deal was about the marriage of the world's leading professional cloud with the world's leading professional network, and he described a future where LinkedIn's data powered Microsoft's products. The strategy was to connect the network of people with the tools they use to work.

The strategy had a shape: the LinkedIn identity and graph, combined with Office 365, Dynamics, and the artificial intelligence that Microsoft was building. The combination would let the products know who the user is, who the user knows, and what the user is trying to do, and the knowledge would make the products smarter. The strategy was the vision, and the vision was the reason for the price. The strategy was the answer to the question everyone asked on Monday.

4. The Price

The price was the part of the deal that made people blink, and the price deserved the reaction. Twenty-six point two billion dollars was a lot of money for a company that had never earned a large profit, and the fifty percent premium was the market's first question. The skeptics asked what Microsoft was buying, and the answer was the data and the network, and the value of the network was the bet.

The price made sense in the context of the strategy, and the context was the battle for the future of work. The companies that owned the professional graph would own the relationship with the worker, and the relationship was worth more than the current revenue of any single product. The price was the price of the future, and the future was expensive. The price was the bet, and the bet was the story.

5. The Reaction

The reaction of the market was immediate and instructive. LinkedIn's shares jumped by almost half on the news, closing near the offer price, and the jump was the market's confirmation that the deal was real. Microsoft's shares were more cautious, dipping slightly, and the caution was the market's question about the price. The reaction was the first verdict, and the verdict was mixed.

The reaction in the technology industry was louder, and the loudest voices were the skeptics. The commentators asked why Microsoft needed a social network, and whether the cultures could mix, and whether the integration would work. The skeptics had seen Microsoft's acquisition history, and the history was full of big bets that had taken years to pay off. The reaction was the debate, and the debate was the beginning of the story.

6. The Leader

The leader of LinkedIn was staying, and the staying was part of the deal. Jeff Weiner, who had led LinkedIn since 2008 and had grown it from a startup into the professional network of the world, would remain as the chief executive, reporting to Nadella. The arrangement was the company's way of keeping the network's culture and its leadership, and the arrangement was the message that the deal was a merger of equals in spirit.

The leadership question was the question of every large acquisition, and the answer mattered. The LinkedIn team had built something that Microsoft could not build from scratch, and the team had to stay to make the deal work. Weiner's staying was the sign that the integration would be careful, and the carefulness was the hope. The leader was the bridge, and the bridge was the plan.

7. The Future

The future of the deal was the future of work, and the future was the point of the price. Microsoft's products lived in the workplace, and LinkedIn lived where the workplace was defined, and the combination was the attempt to own the whole journey: the learning, the career, the hiring, the work, and the collaboration. The future was the professional cloud, and the professional cloud was the ambition.

The future was also uncertain, and the uncertainty was honest. The deal was expected to close by the end of the calendar year, and the closing would be followed by the hard work of integration. The products would need to be connected, the cultures would need to be blended, and the value would need to be proven. The future was the test, and the test was just beginning.

8. The Lesson

The lesson of the deal is about the value of the professional graph, and the value is easy to underestimate. The profiles, the connections, and the careers of four hundred and thirty million people are the most detailed map of the working world that has ever existed, and the map is worth twenty-six billion dollars because the map is the moat. The lesson for every company is that the data about who works, who knows, and who moves is the most strategic asset in the economy of work.

The lesson is also about the leadership of the deal. Nadella did not buy a product line; he bought a network and a culture, and he kept the leader of the network in place. The deal was a statement about the future of Microsoft, and the statement was about the professional cloud. The deal is the June 2016 story, and the story is the lesson: the companies that own the data about who works where will own the future of work, and the future was bought on Monday for twenty-six point two billion dollars. The deal will be judged by the products that come out of the combination, and the judgment will take years. For the leaders watching, the lesson is about buying assets that compound: the network, the data, and the culture were worth more than the revenue, and the revenue was never the point. The point was the graph, and the graph was the future. The professional graph will grow with every profile, every connection, and every career change, and the growth will be the compounding of the deal. The companies that understand the value of the network will be the companies that build the next decade of work. The deal will be remembered as the moment the professional cloud became a network, and the network became the product. The price was the bet, and the bet was the future of work itself. The network is the asset, and the asset is now Microsoft's to build on.

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