How Microsoft and LinkedIn can make costly deal work
AS MICROSOFT officially swallows LinkedIn, it should have one goal: Make this acquisition different. The company has a track record of big buys gone south, and writedowns have topped US$ 13 billion since 2012. The purchase of Nokia’s handset unit seemed doomed from the start, but buying aQuantive, which made software for selling display ads on the web, seemed like a good idea– yet it ended up being a costly mistake. Here’s what Chief Executive Officer Satya Nadella should do to keep the recentlycompleted LinkedIn deal from joining the ash-heap of M& A history.
• Keep LinkedIn Chief Executive Officer Jeff Weiner – and for more than the two to three years that acquired executives usually stick around. Weiner is wildly popular among the staff. He talks a lot about “managing compassionately:” When LinkedIn shares plummeted last February after a bad earnings report, he held a company meeting to ease everyone’s fears. Then he gave up his US$ 14 million ( RM63 million) stock award, distributing it instead to employees. He’s also one of the few Silicon Valley executives who can speak about a corporate mission – helping people find better jobs – with enough sincerity for listeners to buy it.
Right now, Weiner is saying the right things–”He truly believes this is his dream job,” said LinkedIn spokeswoman Melissa Selcher– but some wonder if he’ll be in it for the long haul. “I have to believe in three years, Jeff is not there,” said Steve Goodman, an investor and entrepreneur who sold his company, Bright.com, to LinkedIn in 2014. “LinkedIn has one of the leading mission driven cultures in Silicon Valley,” he said. “Microsoft will have to tread carefully to maintain this. Jeff will have to thread a needle.”
• Let LinkedIn be LinkedIn. This is hard. Many acquirers don’t try giving the purchased company its independence, because the whole value of the deal comes from effective integration.
“It’s very difficult to keep the cultures separate,” said Douglas Melsheimer, a partner at investment banking firm Bulger Partners.
“I can’t think of an example of a large- scale acquisition like this where the acquired company really maintained any independence. Their fate is sealed, to a degree.”
Microsoft doesn’t intend for LinkedIn to be run as a fully independent subsidiary, the way Warren Buffett’s Berkshire Hathaway acquisitions operate, said a person familiar with Microsoft’s plans, who didn’t want to be named because the assimilation planning is private. And LinkedIn will report financial results as part of Microsoft’s Productivity and Business Processes unit rather than getting its own line, according to Selcher. But to keep LinkedIn’s special sauce, Microsoft execs shouldn’t impose their will on Weiner, like demanding an integration with Windows that doesn’t make sense for LinkedIn.
LinkedIn and Microsoft have cited Facebook’s 2012 acquisition of Instagram as a model. Instagram has its own CEO, campus and separate HR system, as well as smaller but important signals like different employee badges. Ryan Roslansky, LinkedIn’s vice president of product, said LinkedIn will retain many of the same privileges, including their own badges.
Microsoft has tried this before. It said it would not take a heavy hand with Skype when that deal went through in 2011. For a while that worked.
Then Microsoft’s approach changed. In 2013, then- CEO Steve Ballmer enacted a massive reorganisation, called One Microsoft, combining groups with similar functions. Skype was lumped in with related Office apps. Since the acquisition, Microsoft has almost doubled Skype’s users and moved it into the more lucrative business market, but bumps and competitive battles remain. • Keep talented managers and engineers motivated. As soon as the deal was announced, LinkedIn embarked on an ambitious effort, “20 in 20.”
The company picked 20 projects it had planned for the coming nine months and sped up deadlines, aiming to complete them in 20 weeks, said LinkedIn’s Roslansky. — WPBloomberg
LinkedIn has one of the leading mission driven cultures in Silicon Valley...Microsoft will have to tread carefully to maintain this. Jeff will have to thread a needle. Steve Goodman, an investor and entrepreneur