Microsoft’s acquisition of LinkedIn last month was greeted with mixed reactions from different quarters. Some observers were of the view that the company may have paid in excess, while others felt nothing was wrong with the stated price, which was announced as $26.2 billion. However, WSJ reports that the Redmond-based tech giant may have paid in excess of $5 billion to acquire LinkedIn due to a bidding war with Salesforce, Facebook and Google.
Quoting sources familiar with the bidding, the report revealed that Salesforce sustained its push for the acquisition of LinkedIn, while Google and Facebook pulled out before Microsoft eventually won the bidding.
Unraveling the mystery behind the stated price
According to a Securities and Exchange Commission filing by LinkedIn on Friday, Microsoft submitted on May 4 a nonbinding indication of interest to buy LinkedIn at $160 a share in cash. However, another company (described as “Party A” by LinkedIn), according to LinkedIn, had nine days earlier submitted its own nonbinding indication of interest to acquire the company for $160 to $165 a share in both cash and stock. Corroborating WSJ’s report, Bloomberg reported that three other companies, which it believed included Facebook took part in the bidding, which lasted for four months.
Two companies, also believed to be Google and Facebook passed on acquisition, with Salesforce and Microsoft raising their respective bids. While Microsoft increased its offer to $196 a share on June 11, the other bidder offered “approximately $200” a share for LinkedIn. Though, Salesforce offered $200 a share, its bid was not attractive enough to LinkedIn, apparently because it was not an all-cash deal compared to what Microsoft was offering despite being $4 less. The other bidder believed to be Salesforce only offered to pay with its stock and cash, the filing said.
The other parties in the bidding were referred to as Parties B, C and D, according to Recode. The report further revealed that Parties B and D, believed to be Google and Facebook respectively pulled out of the bidding.
While the bidding war may not have favored the buyer (Microsoft) in the short run because of a 23 percent increase it had to pay; the company can only hope that the acquisition does not go the way of Nokia. At the moment, there is only one winner, and that of course, is none other than LinkedIn, which benefited immensely from the 23 percent increase in price.
The deal is in the process of being finalized by all parties; but indications point to a successful completion before the end of the year. Should anything go wrong on the part of LinkedIn, the company would be required to pay $725 million as breakup fee; though, that is unlikely going to happen.
While announcing the deal last June, Microsoft’s CEO Satya Nadella assured that LinkedIn will retain its “distinct brand, culture and independence.” Expected to remain at the helm of affairs even after completion of acquisition is LinkedIn’s Chief Executive Jeff Weiner—but reporting to Nadella.
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