Global Financial: Reasons behind Microsoft's Acquisition of LinkedIn

Global Financial

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Stating the reasons behind acquisition of target company and reflection of chronicle events....3
TASK 2............................................................................................................................................5
Evaluating the risk and return as well as advantages of international acquisition to the
acquiring company.......................................................................................................................5
TASK 3............................................................................................................................................6
Conducting comprehensive valuation on target company...........................................................6
TASK4...........................................................................................................................................10
Conducting event analysis to test efficient market hypothesis (EMH).....................................10
TASK 5..........................................................................................................................................10
Stating trading strategy which in turn helps in exploiting price inefficiency during the
acquisition process.....................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Global financial system is highly concerned with the meeting of investment and trade
financing purpose. In addition to this, global financial aspect lays high level of emphasis on
doing cross country transactions which in turn helps organizations in meeting their goals and
objectives. Moreover, with the motive to maximize productivity and profitability as well as
exploring the business operations firm focuses on undertaking acquisition strategy. Hence,
acquisition strategy is highly significant which in turn provides assistance to the firm in getting
the benefits of high economies of scale. The present report is based on Microsoft which is the
leading multinational technology whose headquarter situated on Washington. Such business unit
manufactures and sells software, customer electrical, personal computers and services. In this,
report will present the chronicle events which are related to the acquisition done by Microsoft.
Besides this, it will also shed light on the risk, return, EMH and trading strategy which is
associated with the acquisition process.
TASK 1
Stating the reasons behind acquisition of target company and reflection of chronicle events
In order to acquire Lined in, Microsoft paid $26.2 billion which is considered as one of
the largest acquisition. Moreover, for acquiring social sites such as LinkedIn huge price or
amount was paid by Microsoft. There are several reasons due to which Microsoft laid high level
of emphasis on acquiring LinkedIn are as follows:
 LinkedIn has 433 million members and 2 million paid subscribers which in turn clearly
shows that management base of firm was highly sound. Besides this, Microsoft is also
enjoying high customer base such as more than 1.2 billion office users. However, firm
has no social graph it has to rely on Facebook, LinkedIn and other sources for providing
key connections (Microsoft Pays $26 Billion for LinkedIn in Biggest Deal Yet, 2017).
Thus, with the motive to get benefits from solid social graph and access to 433 million
people Microsoft has taken decision in relation to acquiring LinkedIn.
 Further, outcome or results of research shows that people are highly loyal towards the
services which are offered by LinkedIn. Articles based on it clearly show that large

number of kids plays Minecraft on LinkedIn. Along with this, US adults also use
LinkedIn with the aim to find suitable jobs and developing as well as maintaining
effectual connection with the colleague (10 things you should know about the Microsoft-
LinkedIn $26.2 bn deal, 2017). Thus, for developing relations with the more people
Microsoft decided to acquire LinkedIn.
Hence, it can be stated that to track new opportunities and for gaining competitive edge
over others Microsoft acquired LinkedIn. Enhancement of productivity and profitability is
one o the main motives which in turn encouraged Microsoft to acquire LinkedIn. Moreover,
in the case of acquisition, there is high level of possibility that user of LinkedIn would be the
prospective customers of product or services offered by Microsoft. This aspect clearly shows
that such acquisition will prove to be more beneficial for Microsoft.
By doing investigation, it has been found that after getting approval from European
Commission Microsoft announced that it will acquire LinkedIn by investing $26.2 billion.
Deal was made by Microsoft with LinkedIn by doing all cash related transaction @ $196 per
share with the premium of 49.5%. In addition to this, on the date of acquisition it was
decided that Jeff Weiner will remain the CEO of LinkedIn. However, he is obliged to report
all the aspects to the CEO of Microsoft namely Satya Nadella. In addition to this, all the
transactions were financed by through the issuance of new debt. Further, LinkedIn will
retain its distinct brand, culture and independence after acquisition process. At the date of
acquisition all such announcements have been made Microsoft.