For people from Canada doing online trading in US stocks, or for any trader, it is important to watch out for mergers and acquisitions that reflect on the stock position of the concerned companies. In this case, it could be a reflection on the positive side.
Microsoft Corp’s $26.2 billion acquisition of LinkedIn Corp is the largest ever acquisition in the company’s history. Both companies have been going through tough times recently, and both are expected to benefit from the deal. Microsoft needs to be revitalized, and Chief Executive Satya Nadella believes this deal will achieve that and take away public perceptions of the company being left behind by technology shifts.
New Avenues for Both Companies
The deal is expected to open up new avenues for Microsoft Office and LinkedIn, since each of these have already saturated their respective markets. It is also expected, of course, to build up the competitive position and revenue of Microsoft. Nadella believes that this is finally when the professional cloud and network merge. The LinkedIn social network can revitalize the software offerings of the tech giant.
There are indeed many possibilities of linking the two that can help the day-to-day lives of people. Office could be directly connected to LinkedIn to enable conference or meeting attendees to study more about other participants directly from their calendar invitations. Sales representatives can make use of Microsoft Dynamics software to manage customer relationships, while the LinkedIn data could provide useful information on the background of potential customers.
There are also opportunities with Lynda.com, the video training channel that was purchased by LinkedIn. Microsoft can offer Lynda videos within its Excel spreadsheets or in other software elements. Nadella also has the idea of Microsoft’s Cortana digital assistant being given access to LinkedIn data.
Deal Could Lift LinkedIn from Its Decelerating Growth
Thinking from the LinkedIn perspective, the hope for the deal is to help lift the company from this situation of decelerating growth and provide its shareholders an exit following its stock tumbling from the $269 peak in February 2015 to the depths of $101.11 in February 2016.
Microsoft will pay $196 for every LinkedIn share and a 50% premium to LinkedIn’s Friday, June 24 closing price. The deal has been approved by the boards of both the companies, and LinkedIn controlling shareholder and chairman Reid Hoffman also supports the transaction. Jeff Weiner will continue to be Chief Executive of LinkedIn when the closure of the deal takes place, probably by the end of 2016.
This deal could add to the per-share earnings of Microsoft in 2019, and the company believes LinkedIn’s negative impact on it will be only around 1% on the adjusted earnings for the 2017 and 2018 fiscal years.
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