Microsoft and LinkedIn ongoing merger and acquisition strategic analyses Case Solution
Analyze benefits of deal
There is a clear synergy between Microsoft and LinkedIn, where Microsoft's product "office" now will be delivered online with the help of LinkedIn from its social network database and most of them are professionals. Moreover, both companies can use the customer relation management software of each other to increase their sales.
LinkedIn's users are questionable. It also offered Microsoft added benefits but never had a system which required users’ identity. Microsoft needs to convince LinkedIn’s users to adopt that identity and use it across as many Microsoft products as possible.
LinkedIn is the largest and the valuable professional network and it continues to assemble a strong and emergent business, as a result, this has increased LinkedIn’s users to deliver better business and news product to its corporate customers. These innovations have resulted in increased users, engagement, and financial results as well as they have increased the profitability. Furthermore, LinkedIn should also include its users and active monthly users, which will enhance its services of the office and dynamics. LinkedIn will bring complementing facilities to Microsoft's products because of the leading professional cloud and the largest professional social network.
Analyze Negative aspect of deal
The major threat would be if Microsoft does not handle LinkedIn because both companies have different culture and organizational structure whereas, Microsoft has only a few successful acquisitions like power point, excel, Skype, and Xbox.
On the financial grounds, the share price of Microsoft should increase but the meeting should be planned on a Microsoft Outlook calendar integrated with LinkedIn functions. One can get a notification if the other went to the same university/college, this could be done through strategic alliance and partnership as well as a $26 billion payout for LinkedIn that seems outrageously liberal, which is great for LinkedIn, but not great for Microsoft because when the news reached the stock market, LinkedIn's share price increased by 47% however, Microsoft's share price fell by 2%.
The deal represents a critical point for LinkedIn, an opportunity to confirm its claim as the de facto social networking site for business. Being successful among all the contenders in the market so far, the company can plan for the future. With Microsoft controlling the corporate prize string, LinkedIn can focus on what it does best that is to increase the rate at which business relationships develop.
Find out synergy of deal
- Realize a common mission by bringing together the world's largest leading professional cloud and network.
- Build increased commitment across LinkedIn as well as office and dynamics.
- Increase monetization through individual and business contribution and advertising.
- Opposite to the defense of Nokia acquisition, in which Microsoft's phone business was conjugal to Nokia's declining market share of the mobile industry. On the other hand, the LinkedIn purchase is more unpleasant and opportunistic. Microsoft can influence LinkedIn's professional network of professional users and the huge amount of data that it generates to make synergies with its venture targeted solutions.
- Synergies between the management, sharing of knowledge, sharing of expertise.
Ongoing and upcoming challenges of deal
- The ongoing challenge is the funding of the acquisition because Microsoft does not have enough funds to pay the acquisition price, therefore, Microsoft has issued debt to resolve this issue.
- This news has a negative effect on the share price of Microsoft because the price has decreased by 2%.
- The upcoming challenges for the Microsoft are the cultural issue because both companies have different cultures
Integration difficulties and etc
The deal is so large that Microsoft will need to issue new debt to fund the acquisition of LinkedIn. However, acquiring LinkedIn is not encouraged by industry consolidation, as there is no redundancy for reduction that can lead towards quick savings. Furthermore, it will increase Microsoft’s gearing ratios as well as it will increase the interest expense, and ultimately, it will decrease the profitability of Microsoft.
Advice to board of directors
Microsoft should manage its fund, it they can also issue the new share in the market to fund the new acquisition, as this will result in the liquidity ratios to decrease. Therefore, the company should hire technical expert staff to handle the acquisition because in the past some of the acquisitions performed by Microsoft failed.
The issue of culture is rare when there is a merger between the companies, therefore Microsoft and LinkedIn should understand the culture and values of each other and try to merge their value and belief.....................................