Microsoft Gets the Business Microsoft’s Acquisition of LinkedIN
Microsoft have just completed their largest ever acquisition by acquiring 100% of business networking group LinkedIn at $196 per share, a 50% premium on the previous week’s close – bringing the sale value to $26.2 billion. The question is whether this gargantuan investment is part of a cunning plan or an incredibly expensive red herring.
The deal, led by Chief Executive Staya Nadella, is seen as a bold move to reposition themselves as technology leaders. Both LinkedIN and Microsoft’s Office suite have taken their products to the max in terms of the market but integration could open new horizons, creating competitive advantage and placing Microsoft firmly at the forefront of technology. Mr Nadella stated, “It’s really the coming together of the professional cloud and the professional network,”. Acquisitions provide the perfect vehicle to integrate new technology with already proven solutions and to combine existing platforms to create an a far more effective, holistic product.
Microsoft and Google continue to vie for world domination. Currently Google sits at #40 in the Fortune 500 with $71b revenue and Microsoft at number 31 with $87b in revenue. Google have a long standing history of acquisitions and until recently were buying, on average, a company a month. There acquisition strategy has primarily focused on the consumer – making their lives easier and more entertaining. In the past Microsoft have competed in this market but with this acquisition we seem to be witnessing Microsoft making a decisive move to not only focus on the business market but to dominate it.
In his book, “Creating Competitive Advantage” Kevin Uphill points out that “you don’t need to be transformational and disrupt entirely new markets with ground-breaking technology to be first. You can, in the sum of your approach be first, as long as you are focused and clear on how you are different and why this adds value to the customer.”
A high percentage of acquisitions fail, primarily because they have not been strategically planned throughout the process – what do we need to buy, is it the right fit, how do we integrate, does it work culturally? Attention to detail at all times is critical success. You only need to look at the AOL and Time Warner to witness one of the most catastrophic failures with AOL dropping over $200b in lost revenue; but then Disney and Pixar, a carefully planned merger, was a match made in cartoon heaven.
Only time will tell whether this acquisition is successful for Microsoft – at those numbers – it’s certainly a bold move. Yet it clearly shows Microsoft accept that Google and Apple have a strong base in the consumer market so the niche they can truly own and dominate is the business market. This is it seems clear thinking and focus which is the driver for successful acquisitions.