Reading the preliminary statement filing with the Securities and Exchange Commission of LinkedIn’s acquisition by Microsoft is not nearly as thrilling as some future movie might make it out to be. The SEC filings rarely come off as exciting as The Social Network and this is no exception. However, we can learn a little about the process leading up to the acquisition, for example, four other companies were approached to see if they held interest in acquiring LinkedIn.
From the headlines, we know that Microsoft is to acquire LinkedIn for $26.2 billion dollars in an all-cash deal. From the SEC preliminary filing, we can see that Microsoft will pay LinkedIn $725 million if the merger agreement is terminated. Beginning on page 31 of the filing, we can also learn much of the narrative surrounding the acquisition that began in February 2016 with a meeting between Microsoft’s CEO Satya Nadella and LinkedIn CEO Jeff Weiner discussing the commercial relationship between the two entities. In March, LinkedIn’s CEO met with an executive of a separate company who expressed that his companies CEO had interest in LinkedIn including an acquisition. This company is referred to as Party A in the filing.
This prompted LinkedIn to reach out to Microsoft to confirm their potential interest in an acquisition.
On March 15, 2016, Mr. Weiner called Mr. Nadella to inquire as to whether Microsoft was interested in discussing further a potential acquisition of LinkedIn, and explained that, although LinkedIn was not for sale, others had expressed interest in an acquisition. Mr. Nadella responded that he would discuss the matter further with Microsoft’s board of directors.
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Also on March 16, 2016, Mr. Nadella spoke with Mr. Weiner, at which time Mr. Nadella confirmed that Microsoft was interested in pursuing an acquisition of LinkedIn and that Microsoft had begun work on the project.
To gauge further interest, LinkedIn also reached out to three other organizations, Party B, Party C, and Party D. Ultimately, it came down to only Party A and Microsoft bidding on the “social network for professionals”. Both CEO Satya Nadella and co-founder and chairman of the board Bill Gates were involved in the acquisition from Microsoft.
On May 6, 2016, the LinkedIn Board met, with representatives of LinkedIn management, Qatalyst Partners, Allen and Wilson Sonsini, respectively, in attendance. LinkedIn management informed the LinkedIn Board that Party B, Party C and Party D were not interested in pursuing a transaction, but that Party B remained interested in pursuing a commercial partnership.
Microsoft and Party A were extended an offer of paying $200 per share (LinkedIn went public in 2011) for exclusive negotiations but neither took that offer. Party A offered $171 per share of LinkedIn common stock while two days later, Microsoft offered $172 per share. Rather than go the route of an incremental auction, best and final offers were put in and both companies tied at $182 per share but Microsoft was chosen because of their ‘all-cash’ offer. Party A put in another offer a week later at $188 per share using $85 in cash and the rest Party A’s common stock but this was after signing an exclusivity agreement with Microsoft for a period. On June 5th, Party A put in another offer that represented almost $200 per share.
Ultimately, Microsoft won with a price tag of $196 in cash per share of LinkedIn common stock. The merger agreement was announced on June 13th.
Who was Party A? And Party B, C, D? Recode has reported that Party A was Salesforce while Party B was Google and Party D was Facebook but Party C is still unknown.
While it started with an initial offer and a separate discussion, that is some pretty savvy negotiation to bring major players to the table. Even if three bowed out and just two were left, they worked the price up rather well and the whole thing moved very quickly with having to satisfy a majority shareholder.
