In a surprising move, Microsoft announced Monday an all-cash deal to acquire LinkedIn for $26.2 billion, the equivalent of $196 per share.
In February 2016, LinkedIn had disappointed investors with Q4 2015 results, undershooting revenue and earnings guidance, causing share prices to drop to $101 per share from $198 per share in just one day. Prior to the acquisition announcement, LinkedIn shares were trading at $135 per share.
LinkedIn is the dominant global professional social network, with more than 400 million users in more than 200 countries. The company has reported that the LinkedIn site has more than 105 million monthly active users.
LinkedIn is also a significant player in the talent acquisition and recruiting space. Revenue from its Talent Solutions business unit accounted for $558 million, or 65% of total revenues, in Q1 2016, and grew 41% year-over-year.
In recent years, the company acquired SlideShare (the online content sharing business) and Lynda (an online professional learning and development platform), and it recently launched ProFinder, a platform that allows businesses and individuals in a growing number of metro areas to engage local, skilled specialists as contractors on a gig basis.
Microsoft has stated a number of motivations for the acquisition, including overlaying Microsoft’s solutions into LinkedIn’s enormous professional network.
Microsoft has largely operated as an SMB and enterprise software solution company versus a n-sided platform business (with perhaps the exception of Skype). While the company has been gradually making the shift to cloud solutions (e.g., Azure), this move squarely places the business in the external “platform” space, where players have been highly valued by investors in recent years.
From a labor and services procurement standpoint, it is not clear how the acquisition will alter buying programs over the foreseeable future. For the time being, it appears LinkedIn will continue to operate with its current offerings, largely made up of talent acquisition and recruiting solutions. With the exceptions of temporary staffing firms and the seminal ProFinder line of business, LinkedIn has not really played in the contingent workforce space. What may, however, be significant for practitioners is that the acquisition represents further validation of the broad shift toward external cloud platforms and ecosystems, as well as as-a-service models.