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Microsoft Acquiring LinkedIn for $26 Billion Cash

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That's a bold move, Cotton. I'm liking the new Microsoft. 

Microsoft is paying $26 billion in CASH, a 50% premium over Friday's price:

Microsoft Pays $26 Billion for LinkedIn in Biggest Deal Yet - Bloomberg

Microsoft Pays $26 Billion for LinkedIn in Biggest Deal Yet - Bloomberg

Eye opening:

The $26.2 billion offer values LinkedIn at about 91 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. Excluding net cash, the multiple is about 84 times Ebitda. That’s the highest of any takeover valued at more than $5 billion this year, the data show.

On a conference call, Microsoft said it’s confident in the cash position it has and that the company will keep investing for growth.

However, the debt-financed LinkedIn deal gave Moody’s Investors Service pause. The agency placed Microsoft’s debt rating under review for downgrade, saying the purchase will increase Microsoft’s gross debt to two times Ebitda, exceeding the 1.5 times leverage Moody’s has said could pressure the rating.

Microsoft and Johnson & Johnson are currently the only two U.S. companies with a AAA credit rating.

Microsoft made several big acquisitions over recent years under previous CEO Steve Ballmer, though many of them have not panned out as hoped. Microsoft has largely written off it’s $9.5 billion purchase of Nokia Corp.’s mobile phone business, Skype hasn’t matched the promise of integrating into other products after the $8.5 billion deal in 2011, and Yammer has been a mixed bag after the corporate social-network operator was bought in 2012. Nadella’s 2014 purchase of Mojang AB, the maker of the Minecraft video game, has been a bright spot.

When assessing acquisitions, Nadella thinks about whether the target would expand market opportunity, ride the technology waves of the future and be at the core of Microsoft, he said in an interview with Bloomberg Television. Buying LinkedIn “checks all those boxes,” he said.

For an analysis of Microsoft’s track record with acquisitions, click here.

One unspoken reason why LinkedIn sold: Stock based compensation.

Why Microsoft bought LinkedIn: Adding social selling to CRM.

Total addressable market is $115 billion:

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