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News report: Microsoft will buy LinkedIn with us $26.2 billion in full cash, which has soared nearly 50% before the market - news from Wall Street  Microsoft blog: Microsoft to acquire LinkedIn   1) this big deal is made by Morgan Stanley. Microsoft will mainly issue bonds and acquire LinkedIn with full cash. After the acquisition, LinkedIn will maintain its independent operation, and the former CEO will report to the top management of Microsoft. 2) LinkedIn's closing price was $131.08, and Microsoft's acquisition price was $196 per share, so LinkedIn rose by 60% before trading today. I believe many Chinese hold this stock. Congratulations. 3) According to Microsoft, the common goal of Microsoft and LinkedIn is to empower people and organizations, so it is reasonable to combine them. 4) In fact, the current situation of Microsoft is that it has a bunch of tools and no main line. The problem with LinkedIn is that it has a bunch of users and lacks new stories and ways to cash in. The current situation of Microsoft and LinkedIn, especially Microsoft's products, are easy to use, but they are scattered. They package office 365 services rigidly, but they lack better selling points:       5) so together, the reason why Microsoft is willing to spend a lot of money to acquire LinkedIn is that I think the key point is the following figure:    5With LinkedIn users and social relationships, all Microsoft products can be organically linked (all LinkedIn users and organizations have become potential buyers of office 365). LinkedIn to Microsoft is just like Google + to Google, but at least Google has a Gmail, and Microsoft really does not have a reliable account system (LinkedIn's relationship system is far less than Facebook, but what Microsoft wants is not all, only the professional market. From this point of view, LinkedIn's positioning and social relations are on the contrary More suitable). If everything can really go according to Microsoft's ideal, then in the future LinkedIn will become the entrance of grafting all services of Microsoft, and all products will be packaged on it. As for LinkedIn, anyway, the story can't be told, the potential of advertising cash flow is limited, and the market will be monopolized by Facebook and Google. Then it's simply dependent on the giant, and it has a very important strategic position, which is not bad. 6) LinkedIn is not only a recruitment product and social network, but also a focus on business news and content recently. Therefore, this is also a point that Microsoft values. Content is sticky and communicable, and news is also needed by professionals. In addition, with the corner layout of online learning websites acquired by LinkedIn before, we can put them togetherThere are still some small uses. 7) In my column "everything about a startup" - Zhihu, it is mentioned that the three giants in the United States are all fighting for AI. Apple has Siri and Google has Google AI. Amazon has Alexa, of which Siri has the hardware equipment foundation. Google has the strongest technology. Amazon is the most ingenious and most likely to make a drastic cut from the Internet of things. In fact, Microsoft also has its own AI product called Microsoft Cortana. Still, the core of AI is that you need to know who this person is and what this person wants to do, and LinkedIn can make up for Microsoft. This is a war about the future. 8) Microsoft has acquired yammer for office 365. LinkedIn is the second big move. I believe Microsoft will not hesitate if slack is willing to sell in the future. After all, for a giant who obviously lags behind the market, what is money for? Don't believe it? If you don't believe it, just look at all kinds of capital operation before and after Baidu. -------- more answers please see more articles of Qu Kai to venture capital methodology - know more column, more interactive attention to the 42 chapter of the official account, , I think, forget LinAs a popular social software platform, kedin focuses on its human resource SaaS, which makes it easier to understand Microsoft's strategic intention. In the past three years, all large-scale M & as of technology companies are basically inseparable from one of the following four themes (mobile, cloud, big data, social). In 2016, of course, autopilot, artificial intelligence, VR / AR and robot can also be added. The acquisition of LinkedIn can obviously be placed under the social theme, and also involves big data, cloud (considering the synergy effect of SAAS and LinkedIn of Microsoft's office 365) and mobile (considering the strong profitability of LinkedIn on the mobile end). However, social topics alone do not seem to be able to smoothly connect with Microsoft's current business and future business. A more reasonable explanation is that Microsoft is laying out its SaaS strategy. 0. Transaction details: Microsoft acquired LinkedIn at $196 per share, which is almost equivalent to 50% premium of last weekend's price. However, compared with the high of $265 in April last year, the transaction volume is equivalent to 5.7-5.9 times of LinkedIn's 2017 revenue forecast, which is also relatively high in terms of the current valuation of software / Internet industry in North America. So maybe we should congratulate the shareholders of LinkedIn. 1. LinkedIn, the acquiree, has had a hard time recently: its share price has fallen from its 2015 high. twentyLynda (online learning website), which was acquired by US $1.5 billion in 2015, is considered to be an expensive acquisition. The guidance given in fiscal 2015 is also relatively poor. Compared with the consensus of Wall Street, EPS is 75 cents, and LinkedIn gives a reference of 55 cents, which partly leads to the decline of share price. At the same time, LinkedIn is also experiencing the restructuring of its internal sales team, and the process is painful. However, LinkedIn is a very unique company because it has a very unique resource: the user's career and network. This includes the title of the occupation, the company where you work, the business area, and the network. This is a resource that any other social network can't get, and it may become a part of the key data of CRM software. Of course, it's not easy to make good use of these resources. At least LinkedIn doesn't really make good use of this part of data. Whether Microsoft has the ability to integrate these data is unclear. 2. The acquisition history of Microsoft is not good: in addition to the acquisition of Skype with us $8.5 billion and Nokia with us $7.2 billion, the big deals with more than US $1 billion include aquantive (2007), fast search & transfer (2008), Navision (2002), Visio (2000), yammer (2012) and mojang (2014). Skype and NOKIa's acquisition is now generally regarded as a failure, while other acquisitions are hardly successful. Compared with EMC, Microsoft spent a lot of money, but it didn't buy a lot of decent things. (EMC's purchase of VMware may be one of the most successful acquisitions in the history of technology; the latter supports more than three-quarters of EMC's market value). 3. Strategy: Microsoft seems to want office 365 and dynamics and LinkedIn to produce some synergy, and then create value for the company. In the short term, the use of LinkedIn can stimulate the sales of office 365 and dynamics, especially dynamics. Dynamics is Microsoft's ERP and CRM suite for enterprises (especially small and medium-sized enterprises). Obviously, under the pressure of salesforce, the advantage of dynamics is not obvious. Through LinkedIn's professional network, it may help Microsoft sell ERP and CRM. b. However, the last one is obviously not enough to support the acquisition cost of more than 20 billion US dollars. In the medium term, LinkedIn and other major cloud products will not look so bad. In fact, the following figure basically constitutes Microsoft's overall enterprise cloud platform solution based on SaaS. LinkedIn's ability in human resource management (or the ability to be built in the future),Maybe it can become the competitive power of Microsoft compared with salesforce and so on. The combination of manpower + marketing + productivity tools can provide end-to-end solutions for most enterprises (especially small and medium-sized enterprises, Microsoft's core user group). LinkedIn may become a universal card in the whole SaaS system: it may move everything, but it is not easy to play it well. c. In the longer term, in theory, a large number of user relationship data and career information of LinkedIn have the opportunity to generate value in big data, artificial intelligence and other fields. However, it is still unclear whether the large-scale realization that LinkedIn has never achieved can be realized by Microsoft. There's been a rumor that I want a pay rise. Today, I learned that the purchase of LinkedIn, our average salary was pulled up.. I guess the end, but not the process.. (background: the salary of LinkedIn in the bay area is much higher than that of Microsoft in Seattle)  everyone has analyzed it from a commercial point of view, so I will analyze this acquisition from the perspective of technological development. With 30 years of technology accumulation, Microsoft has almost a full set of technology product lines. However, due to missed the great development of mobile and social era, what we lack most is: mobile computing platform and cross platform user data. In terms of platform, win phone is hard to support, but the dust of mobile battlefield has settled. Hololens has opened up another battlefield and is far from profitable. In terms of cross platform user data, Microsoft can take it nowIt's Bing search that has to be done. However, due to Microsoft's neglect of user data management (due to the fact that MSN Messenger and Skype are private communication tools, the retention of user's personal information is extremely low), a lot of Microsoft's accumulated data can not be accurately described to Internet users, which also causes the slow improvement of Bing's search quality, advertising push and news subscription quality. Compared with the traditional "LinkedIn" recruitment model, it is difficult to keep up with the rapid development of social network . With LinkedIn's social network resources, Microsoft has been able to successfully connect all of its productivity suite's core, and greatly extend the product's tentacles. The high gold content of LinkedIn's customer base also ensures the product's profit potential. High quality multi-dimensional user data: since LinkedIn has basically become people's public resume, we will continue to update and clean the data. These data not only reflect a person's background, interests, industry and circle, but also clearly explain the reasons for the connection between different people, such as schools, jobs or open source organizations. This kind of high-quality multi-dimensional user behavior data is exactly what all data-driven technology companies need. newWhich generation of precise search, business intelligence, product recommendation, advertising, personal assistant doesn't need this kind of data for user portrait? Microsoft has accumulated a large number of data industry related scientists in the past decade. If these data can be reasonably used to promote the development of Microsoft in the above fields, the potential market potential is trillions. On the other hand, LinkedIn has also obtained much-needed data analysis technology and infrastructure: LinkedIn has been doing human based search and information recommendation for five years, but the progress is slow. This is because precise search, information push, social networking and other businesses need a strong data engineering team and infrastructure group to support. Scientists based on artificial intelligence and deep learning have basically been divided up by several giants in the market, and new giants such as Uber and Facebook are also competing for people at high prices. By sharing the whole set of big data back-end architecture of Microsoft, the data science team and research institutions will share the operation cost of LinkedIn and obtain the technical foundation to support the leapfrog development of business. Channels for data realization: Although LinkedIn's enterprise service market is quite low-key among the public, it is a market with a high amount of gold and feeds numerous technology companies. LinkedIn has the only corporate social network in the market. However, there is a lack of channels for cash flow. After this marriage, these data can show value through Microsoft's full enterprise service suite. In addition, the stickiness of LinkedIn users can also be improved by joiningThe Microsoft ecosystem is further improved. So it's a 1 + 1 deal that's much bigger than 2. Some people cited Microsoft's failed acquisition cases in the field of personal devices in recent years. However, I would like to point out that Microsoft has been quite successful in the acquisition of enterprise business. Which one of PowerPoint, docs, Visio and Skype was not acquired in that year? Many times, acquisition is like marriage. Some people are very good, but they are not suitable to be together; some people are mediocre, but they complement each other and become a perfect match. If it is said that the enterprise software market of the previous generation is dominated by information technology, then in the business intelligence service market driven by big data and machine learning of the next generation, Microsoft has successfully determined its leading position through this acquisition. This paper analyzes several common problems:    1. Why issue bonds to pay for acquisitions? Microsoft has more than $100 billion in cash on its account. Why borrow money to buy LinkedIn? Because Microsoft has only about US $3 billion in cash in the United States and US $97 billion overseas, bringing these funds into the United States will bring huge tax pressure (up to 35% of the return tax in the United States). Therefore, from the perspective of Microsoft, the cost of borrowing to acquire LinkedIn is lower. Previously, apple issued US $6.5 billion of bonds in 2015. Although Apple has US $180 billion of cash overseas, and the money is actually used to distribute dividends to shareholders, it also refreshes the three concepts of financing for large US enterprises. But Microsoft'sMoody's AAA credit rating is also threatened because of this acquisition, and only Johnson & Johnson, Exxon and Microsoft have such high ratings in the United States. Moody's believes that the issuance of bonds will double Microsoft's debt / EBITDA, and Microsoft also needs to reserve some funds to complete the stock repurchase plan, so it faces certain pressure in debt repayment. The downgrade is likely to raise the cost of debt financing for Microsoft. There are only three key elements in a single M & A: the buyer wants to buy, the seller wants to sell, and the price is appropriate. You can also add one that no one is looking for trouble, because there may be other bidders before the delivery of any project, and some big mergers and acquisitions will hang up once they touch the red line of a country's monopoly law. 2. Buyer: why does Microsoft want to buy it? Microsoft's core business is software sales, accounting for about 60% of Microsoft's revenue. With the rise of cloud computing, the traditional on premise software model is receiving a significant impact. More and more software is no longer installed locally, but installed or used through any terminal at any place that can be connected to the Internet. Although Microsoft has been increasing the proportion of cloud SaaS revenue in recent years, the total revenue of $5.8 billion is only 6.2% compared with Microsoft's overall revenue of $93.6 billion, which is too small. To this end, Microsoft has been looking for a good acquisition target. In 2015, it was once rumored that it planned to acquire salesforce, a leading enterprise in the cloud CRM market. However, in May 2015, the media revealed that it was due to salesforceThe asking price is too high (US $70 billion, compared with Microsoft's asking price of US $50 billion), and Microsoft has interrupted the merger and acquisition negotiations. Salesforce has about 20% market share in cloud CRM, compared with Microsoft's 6%. LinkedIn, whose price is only half of salesforce's, gives Microsoft an opportunity to implement its cloud strategy and becomes an important part of Microsoft's cloud strategy. 3. Seller: why does LinkedIn want to sell? In early February, LinkedIn cut its forecast for the company's future revenue and earnings, leading to a sharp drop in its share price. The core reason is that the growth rate of LinkedIn is falling sharply. Although in the past few years, the company has been hoping to diversify its business from the core recruitment business to the advertising business, which is the strength of social networks, and develop sales leads through data analysis However, the overall revenue growth rate of LinkedIn has been declining in the past five years, and it will continue to slow down in the next few years. From the financial statements of LinkedIn, we can see that the advertising business of LinkedIn (that is, marketing solutions in the financial statements) as the company's key business direction, the growth rate in 15 years is significantly slower than that in 14 years, from 46% in 14 years to 28% in 15 years,The proportion of advertising business in the overall revenue has not increased in the past three years. LinkedIn realizes that it is difficult for social platforms without high activity to generate good advertising benefits, so advertising revenue cannot grow rapidly. So on February 5, when LinkedIn released its fourth quarter financial data for 2015, the company's share price plummeted by about 40%. It is also the decline in the share price of LinkedIn that makes the company one of the most attractive acquisition targets among technology stocks. As early as February 22 this year, the Research Report of Goldman Sachs raised LinkedIn's "M & a possibility index" from level 3 to level 2, which means that analysts believe that LinkedIn has about 15-30% possibility of acquisition. 4. Price: is Microsoft's $26.2 billion offer expensive? The news headlines about Microsoft's acquisition of LinkedIn mostly contain the words of "50% premium". Some even say that the share price of LinkedIn has "soared by 50%", which is really frightening. It seems that Microsoft is a big wrongdoer who has paid a high price to buy a company with a low market valuation. But in fact, if you look at the stock price of LinkedIn in the past few years, you can see that Microsoft made the acquisition at the lowest price of LinkedIn in recent years. Just over a year ago, LinkedIn's market value was 11 times of its annual revenue. Before the news of Microsoft's acquisition of LinkedIn, LinkedIn's market value was only 11 timesFive times the annual income. So many people ask whether the sale of LinkedIn has anything to do with the one-day plunge of about 40% in LinkedIn's share price on February 5 this year? The answer is, of course. When Satya NADELLA, the CEO of Microsoft, and the CEO of LinkedIn, were interviewing with the company, the reporter asked, "why did you decide this, why now? And how much does the price drop have to do with it?" and NADELLA, with good PR training, cleverly avoided the last sensitive topic about LinkedIn's stock price. Although NADELLA did not give a positive answer to whether the collapse of LinkedIn's share price will have an impact on the acquisition, we can imagine with our toes that if today's LinkedIn is still the market value before the collapse in February, the acquisition cost of Microsoft will certainly rise sharply. In this interview, it was revealed that Microsoft had communicated with LinkedIn as early as January this year, and it was only in recent months, that is, after the stock price of LinkedIn plummeted, that the two sides entered into a serious discussion. So, if the share price doesn't fall, LinkedIn may not sell at all. As for whether the purchase price is too expensive, it's not to say "more than 20 billion dollars", but to be reasonableCompared with the purchase price of Microsoft and the transaction multiple of similar mergers and acquisitions in the past. According to the Research Report of Goldman Sachs, Internet M & A multiples in the past five years are basically 6.1x NTM EV / revenue (enterprise value / revenue in the next 12 months) or 26.9x NTM EV / EBITDA (enterprise value / earnings before tax, interest, depreciation and amortization in the next 12 months), while Microsoft's acquisition of LinkedIn is about 6.9x 2016e EV / revenue or 25.4x 2016e EV / EBITDA. That is to say, compared with the industry average of the past five years, the acquisition price of Microsoft is not high. However, no matter the valuation multiples of historical transactions, for strategic acquisitions, valuation can be justified by strategic objectives, because there are many synergy effects of strategic acquisitions that can not be predicted or predicted accurately. The core of M & A is that buyers and sellers can reach a number that all stakeholders (shareholders) of both sides can accept, so that buyers feel that they have picked up a bargain, sellers feel that they have taken advantage, and everyone is happy after the transaction. 5. Who is the biggest winner of this acquisition? The biggest beneficiaries of Microsoft's acquisition of LinkedIn must be its existing shareholders (LinkedIn founder Reid Hoffman's personal net assets increased by about $1 billion), followed by the investment banks that serve the deal. The consultant fee for this transaction may be as high as 10 million to 20 milliondollar. The bond issue used to pay for the transaction may also generate financing costs of $40 million to $60 million paid to investment banks. The buyer's consultant for Microsoft's acquisition is Morgan Stanley. Goldman Sachs advised another potential buyer in the deal, but the source did not disclose the name of the other buyer, according to the report. As a consultant, Goldman Sachs helped Microsoft complete the acquisition of Nokia in 2014 and Skype in 2011. In addition, those Internet companies with potential acquisition value, such as twitter, have benefited from a 3% rise in share price after Microsoft's acquisition of LinkedIn. Twitter also has a similar dilemma with LinkedIn, that is, a decline in growth and a 39% drop in share price this year. As mentioned above, "no one is looking for trouble" is a necessary factor for the successful delivery of M & A. in fact, another natural potential buyer (or even better buyer) of LinkedIn is Google. If Google doesn't stop it halfway and join Microsoft in bidding war over LinkedIn, then Google will be the most natural strategic buyer of twitter. The M & a tide in the capital market is usually cyclical. When the valuation of the whole industry declines, the company with strategic value becomes a good acquisition target. Microsoft's acquisition of LinkedIn is likely to open up a wave of Internet enterprise mergers and acquisitions, and let Internet enterprises with slower growth and greater cash flow pressure go through the process of being acquired by technology giantsIn the process, we can get more platforms, more financial support, and most importantly, more time to create value. ----------------------------  to add my personal opinion: although Microsoft's acceptance of LinkedIn seems to have a lot of room for imagination, it has not been able to solve the fundamental problem of slower growth of LinkedIn. CEO NADELLA's ppt speech is also full of unflattering ideas about some cooperative products. After all, the fundamental demand of users to go to LinkedIn is "looking for better opportunities". Here "opportunity" refers to "work", and Microsoft's software is to let users better improve efficiency in their existing jobs, rather than job hopping. So fundamentally, the value proposition of the two products is conflicting, not complementary. Microsoft's acquisition may be a good deal (not buying expensive and rare assets, improving Microsoft's cloud strategic imagination), but for LinkedIn, the future under Microsoft should not go better and better.  article published in the official account "Zhu Yingnan David"  (two-dimensional code automatic identification)
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