Microsoft Corp agreed to acquire world's largest professional network LinkedIn in its biggest ever $ 26.2 billion deal on Monday.
Securing this deal, LinkedIn will become a part of Microsoft's productivity and business process unit.
Besides the dollars changing hands, here are important facts why LinkedIn is worth $ 26.2 billion to Microsoft:
With the world's eyes glued to giants like Google, Facebook and Twitter and their roaring numbers, Microsoft just made a deal with a 400-million strong online network of professionals.
Microsoft, under the leadership of Satya Nadella, has become a company that primarily sells their online services to various business customers. With a deal of this magnitude, Microsoft has only broadened and deepened their customer base in a strategic move.
LinkedIn has had a robust growth as millions of people use this as a professional networking tool with over 100 million active users.
Unlike social media, LinkedIn has a more lucrative audience and potential workforce.
With this deal, LinkedIn could intensify competition in the tech landscape.
The IT Strategy
This deal can change the very nature of B2B tech strategies by creating a barrier that can lockout mega-billion dollar players from potentially big buyers in the market. A large chunk of B2B customers worldwide are on LinkedIn. This could lead to a better development of sales and increase company prospects.
The transaction which is expected to close in this calendar year has received a united approval by all in LinkedIn and Microsoft's board.
What happens to LinkedIn
LinkedIn's chairman, Reid Hoffman, who showed full support for this deal will continue to be the company's CEO reporting to Satya Nadella.
"LinkedIn will retain its distinct brand, culture and independence" a joint statement said on Monday.
The deal is an all-cash transaction at $196 per share at a premium of 49.5% from Friday's close. Microsoft will finance this transaction by issuance of new debt.
Microsoft also plans on speeding up monetization of LinkedIn by encouraging individual and organisational subscriptions and through targeted advertisement.
Morgan Stanley is acting as exclusive financial advisor to Microsoft while Qatalyst Partners and Allen & Company LLC are acting as financial advisors to LinkedIn.
Both the companies see a cost saving number that is close to $150 million annually with the effect of this accusation.
Although, in a situation if LinkedIn were to back out of the deal, they will have to pay a break-up free o0f $725 million.
"I have always had a great admiration for LinkedIn," Microsoft CEO Satya Nadella said in a video on Microsoft's website. "I have been talking with Reid and Jeff for a while ... I have been thinking about this for a long time."
This is the largest deal under Satya Nadella's tenure as CEO, who has been increasing Microsoft's appeal more to business customers with cloud-based services and productivity tools.
(With inputs from agencies)