factors affecting the success and failure of company
TRANSCRIPT
University of Miskolc
Faculty of Economics
Institute of Management Science
Factors Affecting the Success and Failure of
Company Acquisition
Oscar Hermawan
2019
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Contents
Contents .............................................................................................................................................2
Table of Figures .................................................................................................................................4
Tables of tables ..................................................................................................................................4
Chapter 1 Introduction .....................................................................................................................5
1.1 Background ........................................................................................................................5
1.2 Research Question .............................................................................................................6
1.3 Research Objective ............................................................................................................6
1.4 Methodology ......................................................................................................................6
1.5 Scope and limitations ........................................................................................................6
1.6 Overview ............................................................................................................................7
Chapter 2 Literature Review............................................................................................................8
2.1 Definition ............................................................................................................................8
2.1.1 Definition of Merger ..................................................................................................8
2.1.2 Definition of Acquisition ...........................................................................................9
2.1.3 The Difference between Mergers and Acquisition .................................................9
2.2 Merger and acquisition approach and strategy ..............................................................9
2.3 Buyer’s perspective ........................................................................................................ 10
2.4 Seller’s perspective ......................................................................................................... 12
2.5 Merger and Acquisition phase ...................................................................................... 13
2.6 Successful and failed merger and acquisition .............................................................. 15
2.7 Post-merger and acquisition challenges ....................................................................... 17
Chapter 3 Methodology of Research ............................................................................................ 19
3.1 Case study research ........................................................................................................ 19
3.2 Data collection ................................................................................................................ 21
3.3 Case Study Database ...................................................................................................... 21
3.4 Data and document analysis .......................................................................................... 25
3.5 Case study analysis and representation ........................................................................ 26
Chapter 4 The Case Study of Successful Acquisition ................................................................. 28
4.1 Acquisition background ................................................................................................. 28
4.2 Acquisition timeline ........................................................................................................ 29
4.3 Acquisition motivations and perspective from both sides .......................................... 32
4.4 Post-acquisition period .................................................................................................. 33
4.5 Factors of success ........................................................................................................... 34
Chapter 5 The Case Study of Failed Acquisition ........................................................................ 37
5.1 Acquisition background ................................................................................................. 37
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5.2 Acquisition timeline ........................................................................................................ 38
5.3 Acquisition motivations and perspective from both sides .......................................... 40
5.4 Post-acquisition period .................................................................................................. 41
5.5 Factors of failure ............................................................................................................ 44
Chapter 6 Comparison between the Two Case Studies .............................................................. 46
Chapter 7 Conclusions ................................................................................................................... 49
References ....................................................................................................................................... 52
Case Study References ................................................................................................................... 53
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Table of Figures Figure 1 - Strategic Acquisition Objectives of the Buyer ................................................................ 11
Figure 2 - Merger and acquisition process flow diagram ................................................................. 15
Figure 3 – Chain of evidence ........................................................................................................... 20
Figure 4 - Organizational Chart of Microsoft in 2007 ..................................................................... 42
Figure 5 - Organizational Chart of Microsoft in 2008 ..................................................................... 42
Tables of tables
Table 1 - Selling process and seller’s decisional path ...................................................................... 13
Table 2 - Combination phase in merger and acquisition .................................................................. 14
Table 3 - Best practices in Managing Combination ......................................................................... 15
Table 4 - Microsoft - LinkedIn case database, see reference for the source .................................... 24
Table 5 - Microsoft – aQuantive case database, see reference for the source .................................. 25
Table 6 - Data analysis and representation in case study research ................................................... 27
Table 7 - LinkedIn Acquisition timeline .......................................................................................... 31
Table 8 - aQuantive Acquisition timeline ........................................................................................ 40
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Chapter 1 Introduction
1.1 Background
In the recent years, the trend of business merger and acquisition activity is getting
common as one of the business restructuring strategies. The number of merger and
acquisition activity is also expected to increase in the upcoming years. Throughout the
merger and acquisition, both potential buyer and seller focus on creating values as
acquisition may result in cost-cutting, business expansion or even becoming dominant in the
market. During the period of merger and acquisition, dramatic changes will happen. That is
why, good tactic and certain maneuver are required from the start of merger and acquisition
until both companies integrated well. As the activity involved two or more different parties,
the process is obviously complicated and challenging for the involved parties. Therefore,
managing the strategy is critical as this restructuring activity would result to a successful
business deal or to the worst thing that could happen is a failure.
The total number of merger and acquisition process in the international scope has made
some significant growth in the research field about merger and acquisition. Especially, when
the economic development are shifting or the new era of emerging technologies. There will
be more books, articles and scientific journal about merger and acquisition topic in the next
future. The articles and books contain historical background of merger and acquisition and
framework development to the detailed process within pre-combination and post-
combination activities. That is some of the reasons why the thesis writer picked the merger
and acquisition topic.
Each of the merger and acquisition activities that already took place are unique.
Because each company has its own motivation and objection to integrate to another
company. And also, each leader or the chief of the company has its own style of doing the
process of merger and acquisition. It is interesting to draw a line of what is happened during
the transition changes. In practice, it still happens until today that merger and acquisition
activity could lead to a failed one, even though articles and books reveals step-by-step
process and suggest the strategy in doing so. Because of above considerations, this thesis
work will present two case studies, then analyze and compare them within the acquisition
process to get a better understanding on the successful and failed merger and acquisition
activities.
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1.2 Research Question
Every research must have research question, otherwise there will be no answer at the
end of the thesis work. Every thesis work commonly starts with research question as it is the
most crucial part in the thesis work. The research question is as follow: “what are the factors
affecting the success and failure in the company acquisition activity?”
1.3 Research Objective
The objective for this thesis work is to compare two acquisition case studies within the
same company where one case study resulted in a successful acquisition and the other
resulted in a failed one. The comparation result will create a better understanding to the
factors and reasons in successful and failed acquisition process.
With this objective, then the units of analysis in this thesis are the two acquisition case
studies and therefore three companies involved in the acquisition process. The three
companies are Microsoft, LinkedIn and aQuantive.
1.4 Methodology
The methodology of this thesis work will be case study research. The case study
research is commonly used in the minor unit such as individual person to the major unit such
as country. This thesis work will include two distinctive case studies but coming from one
company, Microsoft. Comparison will be analyzed between these two case studies in the
hope that research question will be answered. More thorough information about
methodology will be covered in chapter three.
1.5 Scope and limitations
The scope of this thesis work involves the materials such as supporting documents and
data within two case studies. Almost all the case study materials are taken from the Internet
as the companies are public and have official corporate webpage. Both acquisition case
studies will be from information technologies industry. This thesis work is limited by a high‐
level literature review of English language publications only. Since the thesis work is a
purely case study research, the response to the research question lacks statistical support.
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1.6 Overview
There will be seven chapters for this thesis work. The first chapter describe a brief
introduction about the topic, provides the research work information, including research
questions, objective, methodology and planned content. The second chapter reviews the
literature review and earlier studies related to merger and acquisition process in detail.
Details about the case study methodology and methods are presented in chapter three.
Chapter four presents the case study the successful company acquisition and chapter five
presents the failed one. Chapter six will describe about the comparison between the two
explained case studies. And, the last chapter, details about the conclusions of this thesis
work. Finally, the last part of this document provides a list of the references used in this
thesis.
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Chapter 2 Literature Review
2.1 Definition
Merger and acquisition, or commonly known as M&A, are interchangeable corporate
restructuring activities but it is important two understand the definition between the two of
them before continuing to the case study. On this part, the definition from English literature
will be presented.
2.1.1 Definition of Merger
According to DePamphilis (2009, p. 18), merger can be described from a legal
perspective and an economic perspective. In a legal perspective, a merger is a combination
of two of more firms in which all but one legally cease to exist, and the combined
organization continues under the original name of the surviving firm. But from economic
perspective, DePamphilis also mentioned that merger can be differentiate into three different
types. Horizontal merger occurs between two firms are in the same or different industries. A
vertical merger is one in which companies that do not own operations in each major segment
of the value chain choose to “backward integrate” by acquiring a supplier or to “forward
integrate” by acquiring a distributor. The last type is conglomerate merger, which the
acquiring company purchase firms in largely unrelated industries.
In contrast with the previous definition, according to Gaughan (200, p. 12) a merger
is a combination of two corporations in which only one corporation survives and the merged
corporation goes out of existence. In a merger, the acquiring company assumes the assets
and liabilities of the merged company. Sometimes the term statutory merger is used to refer
to this type of business transaction. There is also subsidiary merger, which is a merger of
two companies in which the target company becomes a subsidiary or part of a subsidiary of
the parent company. In a forward triangular merger a subsidiary of the acquirer is merged
with the target and the acquirer's subsidiary is the surviving entity. Then, there is also reverse
triangular merger which is a transaction between the acquirer's subsidiary and the target but
where the target is the surviving entity.
Another definition on merger from Sherman (2011, p. 2) and he quoted from David
L. Scott in Wall Street Words: An A to Z Guide to Investment Terms for Today’s Investor
is as follows: Merger is a combination of two or more companies in which the assets and
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liabilities of the selling firm(s) are absorbed by the buying firm. Although the buying firm
may be a considerably different organization after the merger. It retains its original identity.
2.1.2 Definition of Acquisition
According to DePamphilis (2009, p. 20), an acquisition occurs when one company
takes a controlling ownership interest in another firm, a legal subsidiary of another firm, or
selected assets of another firm, such as a manufacturing facility. An acquisition may involve
the purchase of another firm’s assets or stock, with the acquired firm continuing to exist as
a legally owned subsidiary.
In contrast with previous definition, according to Gaughan (2011, p. 12) acquisition
is subsidiary merger, a merger of two companies in which the target company becomes a
subsidiary or part of a subsidiary of the parent company. Another definition on acquisition
from Sherman (2011, p. 2) that he quoted from David L. Scott in Wall Street Words: An A
to Z Guide to Investment Terms for Today’s Investor is as follows: acquisition is the
purchase of an asset such as plant, division, or even an entire company.
2.1.3 The Difference between Mergers and Acquisition
According to Sherman (2011, p. 3), A merger typically refers to two companies joining
together (usually through the exchange of shared) as peers to become one. An acquisition
typically has one company, the buyer that purchases the assets or shared of another, the
seller, with the form of payment being cash, the securities of the buyer, or other assets that
are of value to the seller.
Marks and Mirvis (2010, p. 12) simply explained the difference between merger and
acquisition that a merger usually involves the full combination of two previously separate
organizations into a third (new) entity. Meanwhile an acquisition, typically is the purchase
of one organization for incorporation into the parent firm.
2.2 Merger and acquisition approach and strategy
Merger and acquisition activities can be considered as an exclusive opportunity to
create a higher performance. However, companies need to excel the knowhows and get ready
for what it takes to reach the higher performance. The majority of merger and acquisition
activity incorporate the approach and strategy as it will be the basis of why companies are
doing the merger and acquisition. In merger and acquisition, term ‘synergy’ is well used and
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according to Gaughan (2011, p. 132), synergy refers to the type of reactions that occur when
two substances or factors combine to produce a greater effect together than that which the
sum of the two operating independently could account for. In merger and acquisition, it
explains that the capability of companies combination to be more valuable than the
individual parts of the merged companies.
Merger and acquisition is about creating value and there is other thing beside the term
‘synergy’ in merger and acquisition. It is one plus one equal three and it has association with
value and synergy. According to Marks and Mirvis (2010, p. 6), value is created when
organizations join forces in a way that genuinely enhances the capacity of the combined
organization to grow and prosper. To get one plus one to equal three, a combination must
yield more than synergies based on cost savings and the elimination of redundancies.
According to Saint-Onge and Chatzkel (2009, p. 11-14), there are two traditional
approaches to the merger and acquisition and one additional approach that is the combination
between the positive elements of both traditional approaches:
1. The ‘Expense Synergy’, this approach count only on the cost base streamlining from the
company. For example, reducing cost by improving efficiency or streamlining the IT
infrastructure. Moreover, the buyer only maximizes the efficiency without considering
the effective and efficient way in transforming the business. Meanwhile the cost cutting
destroys the seller’s value and its growth capabilities.
2. The ‘Growth Synergy’, whereas the expense focus on the cost, this approach put
emphasis on the growth opportunity. The merging companies will seek the business
transformation that will create higher outcome exponentially. Historically, companies
focus with the ‘growth synergy’ also shows that it is only partly achieved.
3. The ‘Value-creating’, this is one additional approach that can be expressed as the
combination between the ‘expense synergy’ and ‘growth synergy. The goal of having
this approach is to take the constructive impact from both approached mentioned earlier.
With this approach, the motives of companies to do a merger or acquisition can be
narrowed down into two, which are:
a. Offensive motives, for instance becoming dominant player in the market
b. Defensive motives, for instance keeping away from the competitors
2.3 Buyer’s perspective
In merger and acquisition process, there is always one company perform as buyer and
its behavior is similar when it comes to the common buying activity. In buying activity, the
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buyer also have motivation and goals to the process. According to Sherman (2011, p. 38),
buyer’s motivation usually may include all or some of the following:
Figure 1 - Strategic Acquisition Objectives of the Buyer
As a buyer, it is normal to get to know what the situation and condition of the seller.
In merger and acquisition, due diligence activity occurs before the deal. According to Weston
and Weaver (2001, p. 90), an examination of all aspects of prospective partners should be
performed. All aspects means not only about financial, legal and organization as a whole but
also the culture of the organization. Conducting culture due diligence is as crucial as the
normal one. According to Carleton and Lineberry (2004, p. 53), cultural due diligence is a
diagnostic process conducted to ascertain the degree of cultural alignment or compatibility
between companies that are party to a merger or acquisition. It provides data at a sufficient
level of detail to determine potential areas of culture clash and the level of difficulty these
areas represent, and it is used to develop an effective integration/alignment plan to deal with
the impact of organizational culture on the merger or acquisition.
Understanding how buyer acts can also be the key point in buyer’s perspective.
According to Sherman (2011, p. 36), the buyer’s planning and implementation of a merger
and acquisition process involves the following steps:
1. Develop acquisition objectives
2. Analyze the projected economic and financial gains to be achieved by the acquisition
3. Assemble an acquisition team (managers, attorneys, accountants, and investment
bankers) and begin the search for acquisition candidates
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4. Due diligence analysis of prime candidates
5. Initial negotiations and valuation of the selected target
6. Select the structure of the transaction
7. Identify sources of financing for the transaction
8. Detailed bidding and negotiations
9. Obtain all shareholder and third-party consents and approvals
10. Phase II confirmatory due diligence
11. Structure the legal documents
12. Prepare for the closing
13. Hold the closing
14. Post-closing tasks and responsibilities
15. Implement the integration of the two entities
16. Long-term integration
2.4 Seller’s perspective
If buyer has perspective on the merger and acquisition process, then the same with the
seller. According to Sherman (2011, p. 14), reason why the companies are sold are
retirement, undercapitalization, partner dispute or business divorce, reduce risk, death or
illness, poor management, new business idea, glass ceiling, burnout, relocation, lack of
bench strength, serial Entrepreneurship, inadequate distribution system, no ability to
diversify, estate planning and personnel.
No matter what the reason one company has reason to sell the business, there will be
selling process and according to Sherman (2011, p. 16) selling process can be seen from the
following table:
Selling Process Seller’s decisional path
Reaching the decision to
sell
1. Understanding motivations and objectives
2. Building the foundation for values
3. Timing and market factors
Getting the House in Order 1. Assembling advisory team
2. Legal audit and housekeeping
3. Establishing a preliminary valuation
4. Preparing the offering memorandum
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Selling Process Seller’s decisional path
5. Estate and exit planning
Marketing Strategy 1. Targeting qualified buyers
2. Use of third-party intermediaries
3. Narrowing the field of candidates
Choosing a dance partner 1. Selecting the most qualified and synergistic candidate
2. Preliminary negotiations
3. Execution of confidentiality agreement
4. Preliminary due diligence
Fighting it Out 1. Execution of more detailed letter of intent or
memorandum of understanding
2. Extensive negotiations and strategic adjustments
3. Structuring the deal
4. Accommodating the buyer’s team for legal and
strategic due diligence
5. Doing due diligence on the buyer
Preparing for the closing 1. Preparing and negotiation of the definitive legal
documents
2. Meeting conditions to closing
3. Obtaining key third-party consents
The closing
Postclosing issues 1. Monitoring postclosing compensation/earn-outs
2. Facilitating the postclosing integration plan
3. Postclosing challenges
Table 1 - Selling process and seller’s decisional path
2.5 Merger and Acquisition phase
After understanding how the process looks like in both buyer and seller’s perspective,
then it is also essential to understand the phase within the merger and acquisition process.
As we all know, merger and acquisition or any corporate restructuring process indeed has
very extensive and complicated process. According to Marks and Mirvis (2010, p. 36), there
are three phases during the merger and acquisition activities, which are precombination,
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combination, and postcombination phase. Each phase has both typical and successful
emphasis as presented on the following table
Phase When Typical
emphasis
Successful
emphasis
Precombination The deal is negotiated by
executives and then legally
approved by shareholders and
regulators
Financial Strategic
Combination Integration planning are developed
and decisions are made
Political Transition
planning
Postcombination Implementation happens and
people settle into the new
organization
Damage control Value creation
Table 2 - Combination phase in merger and acquisition
Each of the combination phase have five key areas that the company should carry so it will
result more effectively. The five key areas are strategy, organization, people, culture, and
transition management. The following table present each phase with five key areas based on
Marks and Mirvis (2010, p. 45):
Precombination Combination Postcombination
Strategy Clarify strategy,
rationale, and search
criteria
Develop and follow
vision and CSFs
Maintain executive
oversight
Organization Conduct thorough
screening and due
diligence
Study opportunities to
build a new and better
organization
Align organizations,
policies, practices, and
groups
People Prepare people
psychologically
Get the right people in
place and onsite
Regroup individuals
and build teams
Culture Respect the pre-
combination cultures
Manage culture clash
and culture building
Reinforce the desired
culture
Transition
Management
Know where you
want to go … and
Create and staff a
transition structure to
Learn from this
combination so as to
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Precombination Combination Postcombination
what it takes to get
there
execute an integration
program
better manage future
ones
Table 3 - Best practices in Managing Combination
In contrast with the process mentioned earlier, according to DePamphilis (2009, p.
135), merger and acquisition has 10 phases which categorized into three different decision
activities. All ten phases can be seen on the following process flow diagram:
Figure 2 - Merger and acquisition process flow diagram
2.6 Successful and failed merger and acquisition
This thesis work will explain what the factor of the successful and failed merger and
acquisition process would be. In order to have the right case study for this thesis work, it is
important to comprehend what successful and failed means in the process of merger and
acquisition. According to Sherman (2011, p. xiv), successful mergers and acquisitions are
neither an art nor a science, but a process. To be successful, a transaction must be fair and
balanced, reflecting the economic needs of both buyer and seller, and conveying real and
durable value to the shareholders of both companies. Another success factor that was quoted
by Fubini et. al (2007, p. 32) from CEO Peter Wuffli mentioned that: “One success factor is
strategic consistency. I think you need a story that makes sense, and we have had a fairly
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consistent strategy. You lose credibility without it fairly soon, and it can’t just be constructed
in hindsight: The pieces have to fit so you can explain the deals that you are doing within the
framework. In fact, one of our three criteria for a deal was that it has to be strategically
obvious – not just explainable, but obvious.” Then, Fubini et. al also added (p. 62) that
intervention efforts focused on the performance culture have the best chance for success.
The other argument to add in this part, DePamphilis (2009, p. 9) cited from Harding and
Rovit (2004) and Megginson, Morgan, and Nail (2003) that evidence found that the most
successful mergers are those that focus on deals that promote the acquirer’s core business.
And then, added by Marks and Mirvis (2010, p. 37), in successful cases, by contrast, buyers
bring a strategic mindset to the deal. But there is more to this than overarching aim and
intent. Successful buyers also have a clear definition of the specific synergies they seek in a
combination and concentrate on testing them well before momentum builds.
On the other hand, failure in the merger and acquisition is not only happened if there
is no deal at all. As mentioned earlier, the successful and fail of merger and acquisition is a
process. Then, the failure can be indicated during the postcombination too. Failure in the
merger and acquisition if it does not create value for shareholders (Sherman: 2011, p. xv).
Sherman then added that failure merger and acquisition is happened because of the lack of
adequate planning, an overly aggressive timetable to closing, a failure to really look at
possible postclosing integration problems, and, worst of all, projecting synergies to be
achieved that turn out to be illusory. There are three significant reasons for merger and
acquisition failure that were cited from numbers of literatures by DePamphilis (2009, p. 39).
And the reasons are overestimating synergy, slow pace of integration and poor strategy.
Carleton and Lineberry (2004, p. 37) stated that culture clash, the impact of operational and
cultural problems stemming from cultural differences of the two organizations involved in
the merger or acquisition, is undeniably the primary causal factor in the failure of mergers
and acquisitions and strategic alliances.
Based on the explanation within the literature review on the successful and failed
merger and acquisition, then the proposed case study comes from one large company that
has done many acquisitions, and that company is Microsoft. In this thesis work, both of the
acquisition deals were closed. One case study will describe about how well the synergy
implementation is. And the other case study will show that Microsoft wrote-off the deal after
five years from the closing deal period.
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2.7 Post-merger and acquisition challenges
As mentioned earlier, the merger and acquisition process does not stop after the
agreement is made or when the deal is closed or completed. There is one more phase after
the deal is completed, it is the post combination phase. This phase is most likely the most
difficult one as it has greatest challenge for the companies to integrate. In this part, post
combination challenges will be explained as it determine for the successful merger and
acquisition process.
According to DePamphilis (2009, p. 192), there are five categories to conduct the post
combination. There are implementing an effective communication plan, retaining key
managers, identifying immediate operating cash-flow requirements, employing the best
practices of both companies, addressing cultural issues. Each of these categories has its own
challenges. In the effective communication plan, it is also crucial to be honest and consistent.
The communication plan should be targeted to not only the employees, but also customers
and vendors. In the retaining key managers, it should be considered as top priority. Most
common challenges are how to have a complete plan such as bonus, stock options and sales
commission or even retention bonus so the key people in the company can still be kept. In
the identifying cash-flow requirements, it is required to have middle managers to be in the
process as they are the one who handle day-to-day operations. Receivables would be written
off or production would be interrupted. In the employing best practices, merged companies
or acquired companies should know which business process practice can be transformed for
the best practice. In the addressing cultural issues, the challenges would be to have a sensitive
sense to the differences and take time to explain to all employees of the new company what
is expected and what kind of behaviors are desired in the new company.
Within the transition time, issues inside human capital, relationship capital,
infrastructure, regulatory and contractual controls, marketing and operational issues need to
be addressed. One of the most challenges in the post combination is the human capital issues.
According to Sherman (2011, p. 262), many employees fears of downsizing to cut costs,
avoid duplication, and achieve the economies of scale potential provided by the result of
merger and acquisition. Continued by Sherman (2011, p. 263) that common problems take
place in the post combination are lack of communication, weak leadership, technology
integration of infrastructure costs above budget, and also unexpected things such as
economic conditions, third-party claims on liabilities.
According to Weston and Weaver (2001, p. 92), implementation starts as a condition
for thinking about merger and acquisition. The firm must have implemented all aspects of
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efficient operations before it can effectively combine organizations. This means that the firm
must have a shareholder value orientation. It must have strategies and organizational
structures compatible with its multiple business units. Moreover from Weston and Weaver
(2001, p. 93), there are at least two challenges on the implementation of merger and
acquisition. Integration leadership and integration team. Integration leader should have
management leadership qualities, experience with external constituencies, and credibility
with the various integration participants. Also, firms should create cross-functional teams to
devote attention to the issues of integration. But the firm should also be sensitive to the need
for balance between speed and disruption.
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Chapter 3 Methodology of Research
3.1 Case study research
This thesis work will be delivered using case study research as its methodology.
According to Yin (2002, p. 13), case study is an empirical inquiry that investigates
phenomenon within its real-life context, especially when the boundaries between
phenomenon and context are not clearly evident. Hancock and Algozzine (2006, p. 10) stated
that case study defines what is known based on careful analysis of multiple sources of
information about the 'case'. According to Creswell (2007, p. 73), case study research is a
qualitative approach in which the investigator explores a bounded system (a case) or multiple
bounded systems (cases) over time, through detailed, in-depth data collection involving
multiple sources of information and reports a case description and case-bases themes.
The phenomenon on this thesis work will be the acquisition process in one of the
biggest company in Information Technology industry, Microsoft. The context will be the
successful and failed acquisition process within the same company which is Microsoft. And
there will be two cases presented in this thesis work and they would be LinkedIn acquisition
as the successful case study and aQuantive acquisition as the failed case study. The reason
why case study research was chosen as the research methodology is because case study
methodology can be a rich source for understanding the multiple structures that support and
sustain organizational life and business units. Its strengths are in its ability to gain an
insider’s viewpoint during the research process, the more in-depth and nuanced findings
based on that, and in its flexibility in using different methods (Mills et. al 2010, p. 76). At
the end of the thesis work, it will have the summary report of the successful and failed
acquisition by Microsoft case study as Hancock and Algozzine (2006, p.10) mentioned that
the report of outcomes generally narrative in nature, consisting of a series of illustrative
descriptions of key aspects of the case.
There are three types of case study research according to Creswell (2007, p. 74). In
single instrumental case study, the researcher focuses on an issue or concern, and then selects
one bounded case to illustrate this issue. The second type, collective case study (or multiple
case study), the one issue or concern is again selected, but the inquirer selects multiple case
studies to illustrate the issue. The last type of case study design is an intrinsic case study in
which the focus is on the case itself because the case presents an unusual or unique situation.
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Multiple-case design have both advantages and disadvantages compared to single-
case designs. Yin (2002, p. 53) explained that analytic conclusions independently arising
from two cases will be more powerful that those coming from a single case alone. The
context of the two cases are likely to differ to some extent. Another advantage using multiple-
case design in this thesis work, two case studies will be picked and both of them are in
contrasting conditions, successful acquisition case study and failed acquisition. Yin
mentioned that with the contrasting situation, it will vastly strengthening the external validity
of the findings compared to those from a single case alone.
According to Yin (2002, p. 19), case study designs needs to maximize four conditions
related to the quality: (a) construct validity, (b) internal validity, (c) external validity, and (d)
reliability. In the construct validity, there are three tactics available to increase construct
validity when doing case studies. The first is the use of multiple sources of evidence. The
multiple sources of evidence will be discussed in the data collection part. The second tactic
is to establish a chain of evidence. In the internal validity, the analytic tactic of pattern
matching, is one of addressing internal validity. The external validity problem has been a
major barrier in doing case studies. To have this external validity, the theory of one case
study need to be applied as well in the other case study. In the last condition, the development
of a case study database is another way of dealing with reliability. The case study database
will be presented as well after the data collection part.
As mentioned earlier that maintaining chain of evidence is important in case study
research, the following figure shown and its subsequent description explains about it in
detail:
Figure 3 – Chain of evidence
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Yin (2002, p. 105) stated chain of evidence increases the reliability of the information
in a case study. The principle is to allow an external observer to follow the derivation of any
evidence, ranging from initial research questions to ultimate case study conclusions.
Moreover, this external observer should be able to trace the steps in either directions. This
explanation can be seen as the following figure shows.
3.2 Data collection
Data collection in case study research can come from many resources. This data acts
as the source of evidence. According to Yin (2002, p. 85), there are six sources of evidence
which are documentation, archival records, interviews, direct observations, participant-
observation and physical artifacts. Each of these sources of evidence have its own strengths
and weaknesses.
For this case study research, the sources of evidence comes from documentation and
archival records. Both documentation and archival record are stable as it can be reviewed
repeatedly and they also unobtrusive; not created as a result of the case study. Moreover,
documentation and archival records are exact and precise as they contain exact names,
references, and details of an event. The limitation using documentation and archival records
would be low retrievability and accessibility as it difficult to find and has no access due to
privacy reasons or may be it deliberately blocked (Yin 2002, p. 86).
According to Hancock and Algozzine (2006, p.51), documents examined by a case
study researcher include material extracted from the Internet, private and public records,
physical evidence, and instruments created by the researcher. For this thesis work, the
official website of the involved companies in the case studies are the main source for data
collection. As the documents comes from the original source, the authenticity and legitimacy
should not be questioned. For other supporting documents, for example acquisition proxy
and regulatory procedure will be taken from the official website of the regulatory bodies.
3.3 Case Study Database
As mentioned previously, this thesis work will have sources of evidence coming from
documentation and archival record. It is essential to list down all the sources of evidence in
one place like database to reach reliability conditions. According to Mills et. al (2010, p. 79),
A case study database is a primary method for organizing and warehousing case study data
and analyses—including notes, narratives, tabular material, and documents—in a single
22
space. This entry describes the elements of a high-quality case study database as well as the
four compartments embedded in most case study databases. The following two table will
present case study database from LinkedIn acquisition by Microsoft as the successful
acquisition case:
Case study: LinkedIn acquired by Microsoft
Document Note
Press Release - Microsoft Press release by Microsoft on the LinkedIn
acquisition announcement. Will be used as
background material and presenting the case study.
In webpage format.
Press Release - LinkedIn Press release by LinkedIn on the acquisition
announcement. Will be used as background
material and presenting the case study. In webpage
format.
Press Release – European
Commission
Press release by European Commission on the
acquisition. Will be used as background material.
In webpage format.
Acquisition Presentation by
Microsoft and LinkedIn
Presentation material as a joint conference call
material. The call intended for investors and there
were CEO of Microsoft, CEO of LinkedIn, CFO of
Microsoft and Chief Legal Office of Microsoft.
Will be used as background material and case
study analysis. In PDF format. 24 pages.
Microsoft 2016-2018 Annual Report Will be used as background material and case
study analysis. There are 3 documents in total. In
Word document format.
LinkedIn 4th Quarter 2015 Report
and 2015 Annual Report
Will be used as background material, and case
study analysis. In webpage format.
LinkedIn 3rd Quarter 2016 Results Will be used as background material, and case
study analysis. In webpage format.
Proxy statement - SEC Proxy statement is a document containing
information about topics that will be discussed in
the stockholder meeting. The company will report
23
Case study: LinkedIn acquired by Microsoft
Document Note
this statement to the Securities and Exchange
Commission (SEC). Will be used as background
material and case study analysis. In PDF format
with 213 pages.
Merger Procedure case – European
Commission
Official European Commission document
published as merger procedure document. Will be
used as case study analysis. In PDF format with
117 pages.
Email Jeff Weiner sent to LinkedIn’s
employee
CEO of LinkedIn decided to publish an email that
had been sent to all LinkedIn employee. Will be
used as background material and presenting the
case study. In webpage format.
Email Satya Nadella sent to
Microsoft’s employee
CEO of Microsoft published an email to all
Microsoft employee. Will be used as background
material and presenting the case study. In webpage
format.
Blog article from Jeff Weiner after
acquisition complete
CEO of LinkedIn wrote a blog article about next
step after the acquisition completed. Will be used
as background material and presenting the case
study. In webpage format.
Blog article from Satya Nadella after
acquisition complete
CEO of Microsoft wrote a blog article about next
step after the acquisition completed. Will be used
as background material and presenting the case
study. In webpage format.
Blog articles on functionality
integration Microsoft and LinkedIn
Official LinkedIn article containing LinkedIn
functionality within Microsoft products
integration. In webpage format. In total there are
two articles in webpage format.
CEO of LinkedIn interview on
television news channel
Interview about the progress of post-acquisition.
Will be used as supporting material. In video
format with 5 minutes 8 seconds long.
24
Case study: LinkedIn acquired by Microsoft
Document Note
LinkedIn newly launched service
supported by Microsoft
Article about Microsoft support technical aspect in
LinkedIn live video streaming service. There is
only one article and in webpage format
Table 4 - Microsoft - LinkedIn case database, see reference for the source
The following table will show document and its description for aQuantive acquisition by
Microsoft as the failed acquisition case:
Case study: aQuantive acquired by Microsoft
Document Note
Press Release - Microsoft Press release by Microsoft on the aQuantive
acquisition announcement. Will be used as
background material and presenting the case study.
In webpage format.
Press release of completed
Acquisition – Microsoft
Press release by Microsoft on the aQuantive
acquisition completion. Will be used as
background material and presenting the case study.
In webpage format.
Proxy statement - SEC Proxy statement is a document containing
information about topics that will be discussed in
the stockholder meeting. The company will report
this statement to the Securities and Exchange
Commission (SEC). Will be used as background
material and case study analysis. In PDF format
with 106 pages.
Microsoft 2005 to 2012 Annual
report
Will be used as background material and case
study analysis. There are 8 documents in total. In
word document format.
News article on aQuantive’s
executive leaving Microsoft
Will be used as background material and case
study analysis. In webpage format.
25
Case study: aQuantive acquired by Microsoft
Document Note
LinkedIn profile of aQuantive’s
executives
Will be used as background material and case
study analysis. There are three aQuantive
executives LinkedIn profile:
- Brian McAndrews
- Mike Galgon, and
- Karl Siebrecht
News article on Microsoft Media
Network launching
Will be used as background material and case
study analysis. In webpage format.
News article on Microsoft sells
Razorfish
Will be used as background material and case
study analysis. In webpage format.
News article on Google buys
DoubleClick
Will be used as supporting material. In webpage
format.
Table 5 - Microsoft – aQuantive case database, see reference for the source
3.4 Data and document analysis
In this thesis work, all the source of evidences are listed on the case study database
above. It is crucial how to conduct the analysis for the research. According to Creswell (2007,
p. 163), there are four forms of data analysis and interpretation in case study research. The
first form is categorical aggregation. In this form, the researcher seeks a collection of
instances from the data, hoping that issue-relevant meanings will emerge. In the second form,
direct interpretation, the researcher looks at a single instance and draw meaning from it
without looking for multiple instances. Patterns establishment, the third form, can be looked
for a correspondence between two or more categories. With this pattern, table can be created
to show the relationship between two categories and then researcher can look for similarities
and differences among the cases. At the end, the researcher develops naturalistic
generalizations from analyzing the data, generalizations that people can learn from the case
either for themselves or to apply to a population of cases.
According to Hancock and Algozzine (2006, p.53), there are questions to answer
when gathering information from documents. Questions like what sources are available that
can be used to provide answers to the research question, what type of answers will be
available, how will information be selected from all that is available, how will information
26
be collected, how will documents be represented as answers to research questions, what
ethical concerns are relevant with regard to documents that will be analyzed and how will
ethical concerns be addressed.
In this thesis work, all the above explanation becomes critical and significant in
conducting the document analysis from two case studies. Basic questions such as who has
the information? Where is it? When was it prepared? And how will it be collected? And after
these basic question answered, then another several questions arise such as what are the
difference between documents published from the company and organizations like European
Union? How knowing time period would be important in analyzing the documents? And
what type of information can be taken from a press release document or email of the CEO
that was sent to all employee?
3.5 Case study analysis and representation
According to Yin (2009, p. 111), it is crucial to have a general analytic strategy, rather
than hoping that patterns will emerge simply through studying and experimenting with the
data and documents. There are three strategies which are relying on theoretical propositions,
thinking about rival explanations and developing a case description. The first strategy,
relying on theoretical propositions, is to follow the theoretical propositions that led to the
case study. The original objectives and design of the case study presumably were based on
such propositions, which in turn reflected a set of research questions, reviews of the literature
and new hypotheses or propositions. The second strategy, thinking about rival explanations,
tries to define and test rival explanations. This strategy can be related to the first, in that the
original theoretical propositions might have included rival hypothesis. However, the strategy
is relevant even in the absence of such theoretical propositions and is especially useful in
doing case study evaluations. The third strategy is to develop a descriptive framework for
organizing the case study. This strategy is less preferable than the use of theoretical
propositions or rival explanations but serves as an alternative when having difficulty making
either of the other approaches work.
Hancock and Algozzine (2006, p. 57) explained that a key aspect of doing case study
research is summarizing and interpreting information as a basis for understanding the topic
being investigated. Typically, this process involves examining and reexamining research
questions and answers that evolve as information becomes available for analysis. When
information that is collected defines new questions, the case study researcher adjusts ongoing
and subsequent methods and procedures. At the same time, efforts are made to keep an eye
27
on the prize, that is, to keep fundamental research question(s) at the forefront of the
investigative process. The nature of summarizing and interpreting information also
sometimes means putting aside less relevant information as well as developing a
management system for keeping track of all information that is used or not used.
In doing the case study analysis for this thesis work, the writer will also follow the
following guidelines from Creswell (2007, p. 156-157) that he describes six data analysis
and representation in case study research that shown from the following table
No Activities Data analysis and representation
1 Data managing Create and organize files for data
2 Reading, memoing Read through texts, make margin notes, form initial
codes
3 Describing Describe the case and its context
4 Classifying Use categorical aggregation to establish themes or
patterns
5 Interpreting Use direct interpretation and develop naturalistic
generalization
6 Representing, visualizing Present in-depth picture of the cases using narrative,
tables and figures
Table 6 - Data analysis and representation in case study research
28
Chapter 4 The Case Study of Successful Acquisition
4.1 Acquisition background
On June 13th 2016, Microsoft and LinkedIn published the joint press release about the
acquisition. Microsoft acquired LinkedIn for $196 per share with a total value at $26.2
billion, inclusive of LinkedIn's net cash. On August 19th 2016, LinkedIn stockholders
approved the acquisition agreement. This acquisition was the largest deal ever happened with
Microsoft acquisition history. LinkedIn is keeping its brand, culture and independence.
However, Jeff Weiner, the CEO of LinkedIn, still has his position but reports to Microsoft’s
CEO, Satya Nadella.
LinkedIn is the world's largest professional network on the internet with over 433
million members in over 200 countries and territories as of the date of this proxy statement.
Members use the platform to stay connected and informed, advance their career and work
smarter. LinkedIn offers services that can be used by their users to change the way they hire,
market, sell, and learn. LinkedIn is a free service but in addition to that, it also offers three
categories of monetized solutions: Talent Solutions, Marketing Solutions, and Premium
Subscriptions, which includes Sales Solutions. In talent solutions, it has two elements which
are hiring and learning development. Hiring element offers companies to attract, recruit and
hire talent. Learning development element provides online learning access for both
enterprises and individuals. Marketing Solutions is an answer for companies who wish to
advertise to LinkedIn’s users. Premium Subscriptions which also includes sales solutions,
helps sales professionals find, qualify, and create sales opportunities and accelerate social
selling capabilities. Most of the LinkedIn revenue come from enterprises and organizations
that subscribe the talent solutions and premium subscriptions, as well as member engagement
and quality of the sponsored content delivered to those members to drive marketing
solutions.
In this acquisition, Microsoft emphasizes the growth of its two product parts. There
are Office 365 and Dynamics 365. Office 365 is a Microsoft product and a part of the
Microsoft Office product line. It works based on a line of subscription services that can be
accessed through a cloud-based service. In other words, users can create and share Microsoft
applications such as Word, Excel, PowerPoint, Outlook, and SharePoint anywhere on any
device. There are at least 127 million users using Office 365. Dynamics 365 is also one of
Microsoft product line of enterprise resource planning (ERP) and customer relationship
29
management (CRM) applications as a part of the Microsoft Dynamics product line that also
run on a cloud-based service. There is no such data showing on how many users using
Dynamics 365, but the 2017 Microsoft annual report stated that the users grew more than 40
percent year-over-year.
As Microsoft is the world’s leading professional cloud and LinkedIn is the world’s
leading professional network, both companies became aware of the extraordinary
opportunity at the first quarter of 2016. During the acquisition period, Microsoft had 1.2
billion office users and LinkedIn had 433 million members all over the world. The
combination of the number from both of the companies will help the acquisition not only
challenging but also it might lead to failure. But this number already give the advantage for
Microsoft and LinkedIn to have the synergy and all they have to do is to make the acquisition
works. This number keep growing over time as both of the companies are the leading in the
industry.
This thesis work picked LinkedIn acquisition by Microsoft because not only the
acquisition completed, but also both companies bring synergy and integrated successfully.
This is the reason why it was chosen as the successful one.
4.2 Acquisition timeline
The following table shows the timeline of what happened during the LinkedIn
acquisition process. It is important to see the historical context from the pre-acquisition until
the deal was closed. The information on the table is summarized from LinkedIn proxy
statement document.
Date Description
16th February 2016 CEO of Microsoft and CEO of LinkedIn discussed
potential acquisition for the first time.
10th March 2016 Party A requested a meeting with CEO of LinkedIn for
the idea of acquiring LinkedIn.
12th March 2016 Party B looked for meeting with CEO of LinkedIn and
controlling shareholder for potential acquisition.
15th March 2016 CEO of Microsoft confirmed that Microsoft has interest
in LinkedIn acquisition.
18th March 2016 LinkedIn chose acquisition team (Legal counsel,
Investment banker, Secondary advisor).
30
22th March 2016 LinkedIn Investment banker initiated communication
with another potential buyer (party C) but later informed
it was not interested.
31st March 2016 CEO and CFO of LinkedIn and CEO of Microsoft (and
other executives of Microsoft) held a meeting for an
acquisition.
1st April 2016 LinkedIn shareholder approached party D to inquire the
same interest like three parties.
7th April 2016 Party D was not interested.
12th April 2016 LinkedIn management, and acquisition team held due
diligence call with party A.
13th April 2016 LinkedIn management, and acquisition team held due
diligence call with Microsoft (CEO of Microsoft was
there).
14th April 2016 LinkedIn management, and acquisition team held due
diligence call with party B.
25th April 2016 Party A submitted a non-binding interest at $160 - $165
per share (a mixed cash stock deal with up to 50% cash)
but requested an exclusivity agreement.
27th April 2016 LinkedIn checked with party B.
4th May 2016 Party B was no longer interested. Microsoft submitted a
non-binding interest at $160 per share, all cash.
Microsoft also willing to consider stock as part of the
consideration, and requested an exclusivity agreement as
well.
6th May 2016 LinkedIn wanted $200 per share, but neither party B nor
Microsoft agrees.
7th May 2016 Party A increased the submission at $171 per share (half
cash, half stock).
11th May 2016 Microsoft also increased the submission at $172 per
share (all cash) but also acceptable with stock if it was
LinkedIn wanted. Then LinkedIn wanted a mix of cash
31
and stock in a transaction so the deal could have
qualified as a tax-free reorganization.
12th May 2016 LinkedIn supported Microsoft as the winning bidder if
they offer $185 per share.
13th May 2016 Microsoft submitted for the third time at $182 per share
(all cash with flexibility to stock if LinkedIn asks).
Party A also submitted the same (50% cash, 50% stock).
LinkedIn chose Microsoft.
14th May 2016 Microsoft and LinkedIn signed a 30-day exclusivity
agreement or letter of intent (LOI).
20th May 2016 Party A submitted for the fourth time at $188 per share
($85 in cash and the rest in stock).
6th June 2016 As the LOI with Microsoft almost ended. Party A came
back again. Its share price was increased that party A
offered to $200 per share. LinkedIn came back to
Microsoft to let them know that the LOI almost finished,
and the original $182 was no longer applicable.
LinkedIn asked Microsoft for $200.
7th June 2016 CEO of Microsoft CEO got back to CEO of LinkedIn
that if LinkedIn wanted Microsoft to pay more, then
LinkedIn needed to show Microsoft where it can trim
LinkedIn’s cost.
9th June 2016 Microsoft increased the offer to $190 per share (all
cash).
10th June 2016 LinkedIn wanted Microsoft to get higher at $196 per
share (all cash).
11th June 2016 Microsoft agreed with $196 per share (all cash).
13th June 2016 Microsoft and LinkedIn issued a joint press release on
the acquisition agreement.
8th December 2016 Microsoft and LinkedIn officially closed the acquisition.
Table 7 - LinkedIn Acquisition timeline
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4.3 Acquisition motivations and perspective from both sides
As mentioned in chapter 2, there are two different types of approaches and one
additional that can explain why this acquisition takes place. It was the ‘value-creating’
approach that happened between Microsoft and LinkedIn. From the press release of the
acquisition announced by Microsoft, they aimed connecting the world’s professional cloud
and the world’s professional network by creating new experiences and new value for users.
For both parties, it was neither about reducing cost nor grow opportunity. But rather on
transforming their business more powerful that make a greater impact to their users but also
to remain relevant over time.
As LinkedIn also declared to the public the acquisition through press release, it is
important to see what the CEO of LinkedIn envision the process on its side. It emphasized
that LinkedIn’s vision is to create economic opportunity for every member of the global
workforce. Then, the new mission after the acquisition would be to empower people and
organization. At the same day, the CEO of LinkedIn sent an email to LinkedIn’s global
workforce and he decided to post it publicly on his LinkedIn’s page. He communicated the
message very well to all the LinkedIn’s employee that it requires some time for the changes
and it will be a good changes. Moreover, he also mentioned the significant key point about
how would the synergy will be. Before the acquisition, CEO of Microsoft and CEO of
LinkedIn already had in mind that there are two things need to be aligned: Purpose and
structure. Both of them realized in a short period of time that they have identical mission
statements.
LinkedIn tried to explain why the company chose Microsoft, the CEO of LinkedIn
stated on the email that was sent to all LinkedIn employee. He stated that Microsoft that had
been evolved under Satya’s leadership was a more agile, innovative, open and purpose-
driven company. This statement shows that CEO of LinkedIn observed and understood on
how he envisioned LinkedIn after the acquisition. Moreover, through the press release they
had that LinkedIn mission statement: to connect the world’s professionals to make them
more productive and successful. Microsoft mission statement: to empower every individual
and organization in the world to achieve more. Both of them are trying to do the same thing,
but coming at it from two different places. For LinkedIn, it’s the professional network, while
for Microsoft, the professional cloud. And the combination for both of the companies creates
synergy and give advantage not only for the LinkedIn but also for the Microsoft itself.
Another analysis on the Microsoft’s motivation or reason on LinkedIn acquisition,
that according to European Union Merger Procedure Microsoft and LinkedIn case document
33
the LinkedIn is not substitutable with current available social network like Facebook and
Twitter. Facebook and Twitter are for personal and private use while LinkedIn are for
professional use. Moreover, commission’s assessment that was written in the document
stated that there are three professional business network available in the European region.
There are XING (Germany), Viadeo (French) and GoldenLine (Poland). But of course, in
this case Microsoft will choose LinkedIn over these three region-based professional business
network as LinkedIn has a huge number of active members not only in the European region
but also as global leader.
4.4 Post-acquisition period
After the acquisition completed, there are additional 11,000 new Microsoft employee
from LinkedIn. Microsoft did not set up a new division except the CEO of LinkedIn joins as
senior team and reports directly to CEO of Microsoft. The last point that the CEO of
LinkedIn was made on the email is to make sure that the employees expect little to change.
This is a very great example of a well-communicated message directly from the top
management to all employees regarding the post-acquisition process. Here are the quote from
CEO of LinkedIn to all LinkedIn employee. “You'll have the same title, the same manager,
and the same role you currently have. The one exception: For those members of the team
whose jobs are entirely focused on maintaining LinkedIn's status as a publicly traded
company, we'll be helping you find your next play. In terms of everything else, it should be
business as usual. We have the same mission and vision; we have the same culture and
values; and I’m still the CEO of LinkedIn.”
In this case study, there will be no organization chart shown. As it is clear that the
CEO of LinkedIn reports directly to CEO of Microsoft. It decided this way as the CEO of
Microsoft pointed out that he wanted the CEO of LinkedIn to focus on driving results while
simultaneously partnering on product integration plans with the Office 365 and Dynamics
team. There will be integration efforts team of three people. According to the 2017 Microsoft
annual report, LinkedIn is reported as part of Microsoft’s productivity and business processes
segment. Productivity and business processes segment consists of products and services
related to productivity, communication, and information services that can be operated
through devices and platforms. Some Microsoft products and services under this segment
are Microsoft Office Commercial and Consumer, Microsoft Dynamic business solutions and
LinkedIn.
34
In September 2017, LinkedIn published an article on its website that users of
Microsoft Office 365 can attached LinkedIn profile card. The purpose of having this
functionality is to have a quick and easy way to find more information about the people we
work with, all without having to leave our workflow. In an interview with television news
channel in April 2018, the CEO of LinkedIn stated the progress of post-acquisition was so
far so good. He mentioned that LinkedIn continues to operate independently. He also added
that the integration of LinkedIn functionality to the Microsoft product was in progress and
also the revenue of LinkedIn was growing ten times bigger than after its IPO in 2011.
Then, in September 2018, another article was published about two new additions to
the Microsoft 365 integration. The first addition is Outlook with LinkedIn functionality, so
meeting members’ insights can be viewed directly. And the second one is users of Outlook
can send email through their LinkedIn first-degree connections without having the email
address. These three new functionalities aligned with CEO of Microsoft and CEO of
LinkedIn envisioned from the beginning. They want to make their users easily collaborate
so that it helps them to get their job done well. According to the latest Annual Report 2018
document, LinkedIn still a part of the Productivity and Business Processes Operating
segment in Microsoft.
Integration process of Microsoft and LinkedIn can also be witnessed in one of the new
LinkedIn service. LinkedIn launched its live video streaming service on February 2019 after
more than one year of launching its non-live video service. For this newly launched service,
Microsoft helps the company to deliver the service to its users. Microsoft through its cloud
division supporting LinkedIn in technical aspect. Video streaming service is currently only
available for users in the United States only and it also fulfills the professionals target
audience. This video service will be used for company’s new product announcement,
conference, events, earning calls and awards ceremonies. Even though there is a numbers of
video platform service available on the internet, but LinkedIn has different target audience
and the video streaming service will not be used for entertainment purpose. On its latest
earning revenue reported by Microsoft, LinkedIn revenue increased 29% with record levels
of engagement highlighted by LinkedIn sessions growth of 30%. This number can be
assumed coming from its video streaming service.
4.5 Factors of success
Success factor of LinkedIn acquisition by Microsoft can be spotted from the first they
announced the acquisition. The first factor is about synergy. As viewed in previously chapter,
35
synergy and term one plus one equal to three for the acquisition can be said as the core in
merger and acquisition process. From the analysis that had been conducted, the synergy
between two companies was built from the first day the announcement comes to public. The
synergy subsequently follows to the products of Microsoft being integrated with LinkedIn
functionality such as LinkedIn integration on Office 365 Microsoft product and Microsoft
technical support on its newly launched LinkedIn’s live video streaming service. Synergy is
not about Microsoft take advantage of LinkedIn high position in professional market, but
also LinkedIn also take advantage on how Microsoft can support technical aspect in
delivering LinkedIn products and services. Successful integration will never stop and it will
always continue going. Microsoft and LinkedIn need to keep developing new products and
services that connected both of the companies and the most important thing that the users
can enjoy the products and services delivered by both of the companies.
The second factor is both companies share similar mission and vision. On the
presentation material shown on the acquisition announcement day joint conference call, both
of the companies clearly communicated the common mission they have. Microsoft empower
every person and every organization on the planet to achieve more and LinkedIn Connect
the world’s professionals to make them more productive and successful. According to Marks
and Mirvis (2010, p. 115), Authoritative studies emphasize that the most successful
companies operate with a strong and clear sense of purpose. This sense of purpose comes
from a guiding vision (what we hope to accomplish), a defining mission (what we do), and
deep understanding of markets served, strategies, competencies, and such that add
granularity and distinctiveness to the vision and mission. Equally important are shared values
— which define how we work — which are often quite different among combining parties.
But not with the case of Microsoft and LinkedIn. They have common mission. This would
mean a greater value with great purpose of what they already have.
The third factor of success is the organizational structure of LinkedIn at Microsoft and
the position of the CEO of LinkedIn after the acquisition process. According to Weston and
Weaver (2001, p. 55), the organizational structure may influence the kind of strategies that
may be feasible. Certainly a central question of merger integration concerns the decision of
how to fit an acquired entity into the organizational structure and philosophy of the acquiring
firm. The M form structure appears to have considerable flexibility for handling acquisitions,
small relative to the acquiring firm. M form, or multidivisional organization, is an
organizational structure that each division within company is autonomous enough to be
judged as a profit center, but all divisions share some endowments such as production or
36
marketing. Up until now, LinkedIn is part of Productivity and Business Processes segment
which has the same organizational structure as M form. Additionally, the CEO of LinkedIn
still reports directly to the CEO of Microsoft. Marks and Mirvis (2010, p. 123) pointed out
that The senior leadership team (usually the top executive’s direct reports, but sometimes
including other senior executives) amplifies or distorts the CEO’s intentions to capture value
and make the combination work. Added by Marks and Mirvis that a key resource synergy
comes from the combination of people.
37
Chapter 5 The Case Study of Failed Acquisition
5.1 Acquisition background
On 18th May 2007, Microsoft released a statement that the company acquired one of
the digital marketing service and technology company, aQuantive. On the press release, it
stated that Microsoft acquired the company for $66.50 per share in an all-cash transaction
valued at approximately $6.3 billion. At that time, it was the biggest acquisition ever
happened in Microsoft’s history. It was Steven A. Ballmer as CEO of Microsoft who dealt
with the acquisition.
aQuantive was founded in 1997 and it was a parent company of three digital marketing
service and technology companies. Avenue A|Razorfish, one of the largest interactive ad
agencies in the world. It provides advertisers with industry-leading digital marketing
consultation, media planning and buying, and creative services that help advertisers use the
online channel to build meaningful and profitable relationships with the customers; Atlas, a
provider of advanced tools for both advertisers and publishers. The Atlas Media console is
an industry-leading toolset providing agencies and advertisers with capabilities to maximize
ROI. The Atlas Publisher platform enables publishers to maximize monetization
opportunities for their content; and DRIVEpm which provides services to publishers and
advertisers that match advertiser campaigns with publisher inventory enabling all parties to
maximize ROI. At that time, CEO of aQuantive was Brian McAndrews.
Microsoft completed its acquisition of aQuantive on 13th August 2007. In 2007,
Microsoft has five different business operating segments. There are Client, Server and Tools,
Online Services Business, Microsoft Business Division and Entertainment and Devices
Division. The business operating segments provide a framework for the alignment of
strategies and objectives across the development, sales, marketing, and services
organizations. The segments also help focus strategic planning efforts on key objectives and
initiatives across the company.
Before the acquisition with aQuantive, Microsoft has an advertising platform called
adCenter. This platform engine generates advertisements for Windows Live, MSN® and
other Microsoft online services. AdCenter is part of Microsoft Online Services Business. In
this business division, it displays advertising within portals, channels, and communications
services. It is also stated in the 2006 Microsoft annual report that adCenter will enable the
38
company to increase both display and search advertising revenues by reducing its
dependence on third parties for delivering ads.
Five years later after the acquisition, through the 2012 annual report, Microsoft
announced that it wrote down $6.2 billion of the $6.3 billion it paid for internet-advertising
company aQuantive. Microsoft stated in the annual report that the search business has been
improving but the expectations for future growth and profitability for Online Service
Business Division are lower than its previous estimates. This thesis work chooses the
aQuantive acquisition by Microsoft as the failed case study because of the write down
activity.
5.2 Acquisition timeline
The following table will show the timeline starts when aQuantive was approached to
one company and ends when Microsoft published the acquisition press release. The
information on the table is summarized from aQuantive proxy statement document.
Date Description
Late February 2007 aQuantive CEO is approached by company A for the
potential acquisition.
22nd March 2007 aQuantive’s regular scheduled board meeting.
Following the board meeting, aQuantive CEO rejects
company A’s proposal.
1st week of April 2007 Several parties contacted aQuantive to arrange meeting
discussing about potential consolidations and other
developments in the digital marketing industry.
4th April 2007 The president of the platforms and services division of
Microsoft and aQuantive CEO discuss about the state
of, and future developments in, the digital marketing
industry.
20th April 2007 Representatives of aQuantive and representatives of
company B discuss the digital marketing industry and
the opportunity of commercial relationship. The same
day, Senior vice president of Microsoft contacts
aQuantive CEO and states that Microsoft has interest
in acquiring aQuantive.
39
23rd April 2007 aQuantive chooses investment banker.
24th April 2007 Senior Vice President of Microsoft Online Division
and other Microsoft representatives with aQuantive
hold a meeting discussing industry and market
dynamics.
27th April 2007 Corporate vice president, corporate development of
Microsoft and other representatives of Microsoft meet
with aQuantive CEO and other representatives of
aQuantive. Microsoft says again its interest in
aQuantive acquisition. Following the meeting,
aQuantive contacted company B with information on
other company has interest in acquiring aQuantive.
Company B requested for holding a meeting with
aQuantive.
1st May 2007 aQuantive sends a proposed mutual confidentiality
agreement to Microsoft and company B.
2nd May 2007 aQuantive received mutual confidentiality agreement
from company B and Microsoft.
3rd May 2007 CEO of aQuantive contacted CEO of company A to
inform about the anticipation on receiving a proposal
to acquire aQuantive. Company A had interest and a
form of mutual confidentiality agreement was sent to
company A.
4th May 2007 Representatives of aQuantive presented product and
technology demonstrations to representatives of
Microsoft. Investment banker’s aQuantive contacted
representatives of company B and suggested company
B should be aggressive if they were interested in
acquiring aQuantive. Company B then submitted a due
diligence request list.
8th May 2007 aQuantive received mutual confidentiality agreement
from company A. Company C CEO and its
representatives met with aQuantive CEO and indicated
40
that company C had interest in acquiring a division of
aQuantive, but communicated that company C was not
interested in acquiring aQuantive.
9th May 2007 CEO and Co-founder of aQuantive met with
representatives of senior management of company B
and discussed potential synergies of a combination,
company culture other matters.
12th May 2007 President of Atlas (child company of aQuantive) and
other aQuantive employees had a conference call with
representatives of company B to discuss current
technology platforms, initiatives, and opportunities for
synergies.
13th May 2007 Non-binding written proposals were received by
aQuantive from company A and company B offering
to acquire aQuantive-
14th May 2007 Microsoft communicated verbally to aQuantive’s
investment banker that Microsoft had increased the per
share price offered in its non-binding proposal that had
been submitted on 9th May.
15th May 2007 Company A withdrawn from the process of acquiring
aQuantive. AQuantive entered into an exclusivity
agreement with Microsoft.
17th May 2007 aQuantive chose Microsoft.
18th May 2007 Microsoft issued a press release on the acquisition
agreement.
Table 8 - aQuantive Acquisition timeline
5.3 Acquisition motivations and perspective from both sides
In the press release announced by Microsoft, the company explained that the
advertising industry evolves and grows rapidly and there is a need of software for the
industry. Microsoft chose aQuantive in the hope of evolution phase in Microsoft’s ad
network from MSN to other Microsoft network which includes Xbox Live, Windows Live
and Office Live. Moreover, with aQuantive acquisition, it enables Microsoft to improve and
41
strengthen relationships with advertisers, agencies and publishers by enhancing the
aQuantive advertising platforms and services beyond its current capabilities to serve MSN.
Then, it also provides Microsoft increased depth in building and supporting next generation
advertising solutions and environments such as cross media planning, video-on-demand and
IPTV. The combination between aQuantive’s technologies and services with Microsoft’s
portfolio would create value such as:
Advertisers and ad agencies, benefit from a world-class media planning, buying and
campaign management solution to drive maximum ROI and optimize their reach to
audiences across the increasingly fragmented, interactive media landscape.
Media owners/publishers, gain access to best inventory optimization and monetization
solutions across a full suite of video and targeting capabilities.
The broader advertising ecosystem, benefit from one of the child company of aQuantive,
Avenue | Razorfish which is the leading interactive advertising agency, to continue
serving its impressive client while also embedding the voice of the marketer into
Microsoft’s next generation advertising solutions and services.
Microsoft also expected the acquisition will help make buying and selling media simpler,
smarter and more cost-effective for advertisers, agencies and publishers.
Another analysis on the motivation or reason why Microsoft bought aQuantive is
because in the same year, but to be exact 13th April 2007, Google, one of the Microsoft
competitor, announced that the company acquiring DoubleClick, a global leader in digital
marketing technology and services, for $3.1 billion in cash. It comes to an assumption that
one of the reason that Microsoft acquired aQuantive was the company didn’t want to lose
the competition in the digital marketing industry.
5.4 Post-acquisition period
After the acquisition completed, there were additional 2,600 new Microsoft
employees from aQuantive and they continued to operate and work from its Seattle
headquarters. On another press release statement published by Microsoft, the company
announced new business group, called Advertiser and Publisher Solutions (APS) Group.
This new business group will be responsible for building Microsoft’s monetization engine
to serve the advertiser and publisher community. The APS group will be managed by the
CEO of aQuantive. APS group was created under Microsoft’s platforms and Services
Division (PSD). The structure of this group is shows as follows:
42
Figure 4 - Organizational Chart of Microsoft in 2007
In 2008, one year after the aQuantive acquisition, there was a change in organizational
structure of the company. The person who positioned as president of Platforms and Services
Division, resigned from the company. Then, in the Microsoft 2008 Annual Report, the
organizational structure of the company has no longer Platforms and Services Division. The
structure is shows as follows:
Figure 5 - Organizational Chart of Microsoft in 2008
The Online Services Business that manage on-line advertising platform with
offerings for both publishers and advertisers were still part of the Microsoft’s operating
segment, as show on the 2007 organizational chart. It is not stated anywhere across the 2008
43
Microsoft Annual Report document, which business division managed the Advertiser and
Publisher Solutions Group (where CEO of aQuantive placed).
In between 2008 and 2009, executives of aQuantive chose to resign and move to
another corporation. Here are three names from the list of executives of aQuantive who
resigned between 2008 and 2009 from Microsoft:
1. The CEO of aQuantive, Brian McAndrews, had new position as board of directors in a
telecommunication operator.
2. The Chief Advertising Strategist of Microsoft (Co-founder of aQuantive), Mike Galgon,
had new position as board of directors in the marketing automation platform for the
hotel industry.
3. General Manager at Microsoft (The president of Atlas, child company of aQuantive),
Karl Siebrecht, had new position as Director, President and CEO in the advertisement
industry.
After two years of aQuantive acquisition, Microsoft added new products and services
under the Online Services Business as written on Microsoft Annual Report 2009 document.
These new products and services are Bing; Microsoft adCenter/adExpert; Microsoft Media
Network (MMN); MSN portals, channels, and mobile services; Windows Live suite of
applications and mobile services; Atlas online tools for advertisers and publishers; MSN
Premium Web Services (consisting of MSN Internet Software Subscription, MSN Hotmail
Plus, and MSN Software Services); and Razorfish media agency services. It is pretty clear
that Atlas online tools and Razorfish are products from aQuantive.
Microsoft Media Network (MMN) is one of the product that developed after the
aQuantive acquisition. It is a product that combines DRIVEpm from aQuantive and
Microsoft Direct Response. MMN helps advertisers create targeted campaigns across
Microsoft online portfolio, which includes MSN, Windows Live Messenger and Office
Online. From the interview that was conducted with the head of Microsoft Media Network,
this product was intended to compete directly with AOL’s Platform-A and the Yahoo!
Network. She added during the interview that the network has unique access to 21 million
registered MSN passport users, which can provide brands with more targeted campaigns
based on data that meets their target audience. This could be through re-engagement for
previous visitors, profiling based on user demographics, behavioral targeting from keyword
searches or eventually mobile and gaming opportunities. During the analysis of this case
study, there is no information why Atlas or Razorfish had not been integrated to any of
Microsoft products or service. Instead of integration, Microsoft just put the same original
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names which are Atlas and Razorfish as the company’s line of product and services under
Online Services Business.
In only one year after its launching date, Microsoft Media Network had been
excluded from Online Services Business. What had been left from aQuantive acquisition was
Atlas online tools because Razorfish was sold by Microsoft in second quarter of 2010 to the
world's largest interactive agencies, Publicis Groupe. This acquisition was also stated in the
Microsoft Annual Report 2010 document and it was sold for $530 million.
In 2011, Atlas was still part of the Online Services Business in Microsoft but there is
no such information on how the product integrated to Microsoft or how Microsoft put effort
on adding value to the product. Finally, in 2012, as stated in Microsoft Annual Report 2012
Document, the company wrote-off $6.2 billion and described in the document that
expectations for future growth and profitability for Online Services Business are lower than
the previous estimates.
5.5 Factors of failure
From the analysis conducted previously from the start of the acquisition process until
Microsoft wrote-off the $6.2 billion, there are various factors that can be explained why it
ended badly. First, external environment, which is competition with Google. It made
Microsoft decided to acquire aQuantive in a rush. Google acquired DoubleClick in 13th April
2007, Yahoo acquired RightMedia on the same month with Google acquisition and then
Microsoft acquired aQuantive in 18th May 2007. It appears that Microsoft was too fast in the
decision making and assumed that it is not ready to adjust the situation to its long-term
objective and didn’t incorporate Microsoft vision and mission.
Everything-is-about-Microsoft motivation would be the second factor of failure.
According to Sherman (2011, p. xiv), successful mergers and acquisitions are neither an art
nor a science, but a process. To be successful, a transaction must be fair and balanced,
reflecting the economic needs of both buyer and seller, and conveying real and durable value
to the shareholders of both companies. From the analysis, it can be seen that there was no
added-value to aQuantive but rather just to fulfill what Microsoft needs. Take for an
example, only one of integrated product had been made after the acquisition. It was
Microsoft Media Network which turned out only one year after its launch, Microsoft decided
to exclude. Another example would be no integrated result on the other products. The
analysis shows that both Atlas and Razorfish didn’t integrate to Microsoft, but more into
additional products of Microsoft. This can also be seen from the annual report documents
45
that there is no such research and development expenses recorded for digital advertisement
area.
The third factor of failure is the loss of key executives. Carleton and Lineberry (2004,
p. 11) cited from Galpin (2000) that research indicates that up to half of the executives in
firms involved in a merger or acquisition leave within three years. Retaining key executives
should be part of the post-acquisition phase and it can be clearly noticed that Microsoft didn’t
do much on retaining all the aQuantive’s executives. Of course there are always many ways
to retain executives to be in the company, but the main point is the high capability of
aQuantive leader in developing its products and service to support Microsoft in its marketing
service and without its marketing service leaders, Microsoft lost its ability in competing with
the competitors and keeping the marketing service to be on top of the industry.
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Chapter 6 Comparison between the Two Case Studies
Chapter four and five describes the case study of LinkedIn and aQuantive acquisition
by Microsoft. All process from the pre-combination until post-combination were thoroughly
explained. At the end of each chapter four and five, both success and fail factors are revealed.
In this chapter, comparison between two case studies will be discussed to comprehend more
about the factors of both the successful and failed acquisition. All of the comparisons written
below are connected between each other.
Comparison number 1. Before the acquisition occurred, both case studies shows that
each companies, LinkedIn and aQuantive, dealt with meetings, discussions and due diligence
with Microsoft. Going back to the acquisition timeline in each case study, it can be compared
how was the leadership of two different CEOs when the acquisition took place. In the
aQuantive acquisition, the CEO of Microsoft rarely stepped in the discussions or meetings
with aQuantive. In most meetings before the business deal, Senior Vice President of
Microsoft Online Division and other representatives were being the meeting members.
Meanwhile in the LinkedIn acquisition, the CEO of Microsoft was always in the meeting
and discussion before the deal. It is no doubt that every leader has its own leadership style
but when it comes to the largest acquisition in Microsoft’s history, the CEO of the company
should be involved in every discussions and meetings. Business merger and acquisition is
big step for the company to grow and expand. CEO of the companies also need to step in to
every process of the deal. How can the CEO communicate the vision, mission and the
motivation for the business deal if he is not there all the time? And also, looking on how the
two CEOs of Microsoft and LinkedIn communicated the deal to all the employees, shows
how they want the employee take part because the leaders of the companies realize that they
want all the employees to engage and make it a healthy merger and acquisition.
Comparison number 2. Between LinkedIn and aQuantive case study, there is a clear
difference when it comes to the motivation, vision and mission of the Microsoft’s
acquisition. LinkedIn and Microsoft has the combination vision and mission that they knew
already about the common mission they have. Both companies know already from the
beginning what both companies would be like after the acquisition. Microsoft wants
LinkedIn functionality integrated in Microsoft products, and LinkedIn wants to have the
access to Microsoft users which is much bigger than LinkedIn has. In aQuantive and
Microsoft acquisition case study, it appears that everything is about Microsoft. Especially,
47
before this acquisition happened, two large competitors, Google and Yahoo, acquired as well
marketing service and technology companies. It can be understandable that Microsoft
wanted to strengthen relationships with advertisers, agencies and publishers by enhancing
the company’s world-class advertising platforms and services beyond its current capabilities
to serve MSN. But in this case, it can be seen clearly that the Microsoft just followed of what
happened in the industry and its competitors without any clear vision and mission in terms
of digital marketing service, rather than focusing on what Microsoft long-term goals and its
motivation for growing their marketing business.
Comparison number 3. It is about the new reporting line or organizational structure
in the post-acquisition. In the aQuantive case study, between the CEO of Microsoft and CEO
of aQuantive has another position, which was the president of Microsoft’s Platforms &
Services Division (PSD). The CEO of aQuantive didn’t report directly to CEO of Microsoft.
It happened this way because Microsoft consider the aQuantive business was part of the
platforms and services and also it would be easier to manage. But in the LinkedIn case study,
CEO of LinkedIn reports directly to CEO of Microsoft. Both of the case clearly differ as
based on the assumption that the LinkedIn acquisition really matters on the goals of
Microsoft in the future while the marketing service was not the main goals of Microsoft at
that time. Going back again to the previous motivation, Microsoft followed Google and
Yahoo, its two biggest competitors, acquired marketing service and technology companies.
Organizational structure and reporting line comparison for this thesis can be the new source
topic for other research and thesis as from the writing period of this thesis, literature review
about post-merger and acquisition with reporting lines and organizational structure is still
not available.
Comparison number 4. In the post-acquisition period, after two years of acquisition,
CEO of aQuantive and other executives left Microsoft. There is no information about the
reasons why these executives left the company or how Microsoft tried to retain its former
aQuantive executive, but there could be many reasons why the aQuantive leaders left the
company. For example, it might happened because the post-integration did not go well for
the aQuantive leader or it can also the aQuantive leader didn’t fit to the company’s culture.
There are a lot of reason for this, but what the unhealthy thing is the Microsoft failed to retain
aQuantive leader and without its leader, Microsoft lost its focus and help to develop the
products of aQuantive. Totally different with aQuantive situation, CEO of LinkedIn and
other executives still stay in the company until today. The assumption of direct reporting line
between CEOs and how the organizational structure can be the reason why the CEO of
48
LinkedIn and other executives stays until now. And also, one of the co-founder of LinkedIn
is currently being one of the member of the board at Microsoft. Unfortunately, there is also
no information about how Microsoft retain its LinkedIn executives.
Comparison number 5. During the post-acquisition process, Microsoft and LinkedIn
keep doing some innovation such as the integration of LinkedIn to Microsoft products and
how Microsoft supporting the newly launched LinkedIn video streaming service. Both
Microsoft and LinkedIn completes each other to reach their vision and mission. But if we
take a look at the failed case, aQuantive acquisition, it was Microsoft that seems needs
supports from aQuantive in terms of marketing service and there was no support back from
Microsoft to the aQuantive in terms of business support. This comparison shows that after
the integration process, companies required to have continuous support to each other in order
to have competitive position and the stakeholders are satisfied. It is also important to keep
the high productivity to deliver innovative products and services to the customer in order to
have a profitability results.
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Chapter 7 Conclusions
Merger and acquisition activity is more than just a business deal. It requires great
strategy to achieve the post-merger and acquisition success. The strategy that applies from
the beginning of the activity and keeps continue until both business integrated well. It is not
only about great leadership but it is more about how to make all the elements (strategy,
organization, people, culture and transition management) that are involved in the merger and
acquisition process works. In this part, summary and conclusion of the thesis work will be
explained.
Point 1 is about the healthy merger and acquisition. According to Fubini et. al (2007,
p. 2) healthy merger makes a major contribution to the corporate health of the surviving
company in multiple dimensions such as operating and financial performance, business and
technical capabilities, the strength of stakeholder relationships, corporate culture, the pace
and focus of learning, and the ability of the company to renew and enhance its strategy.
Whereas a merely successful merger looks impressive on the basis of a few early
performance measures and milestones, a healthy merger stands up to searching scrutiny by
knowledgeable insiders for years afterwards. Example of the healthy acquisition is the case
study of LinkedIn acquisition. It certainly shows the ability of both companies to expand and
grow in terms of both stakeholder relationships, the culture of LinkedIn and Microsoft and
also the learning point to grow. It is very clear that if the company have healthy merger and
acquisition, it will lead to good business performance but not the business write-down as
what happened with aQuantive on 2012, five years after the acquisition.
Point 2 is about the importance of the motivation, vision and mission of the merger
and acquisition. According to Marks and Mirvis (2010, p. 47) a clear and agreed-on
definition of synergies guides planning and decision making in successful combinations. The
objective, vision, and mission should communicated well from the beginning of the process
so it can achieve great result of combination. It’s required to have well-communicated
message within organization for the motivation, vision and mission. We could see how much
different Microsoft handled the communication during LinkedIn and aQuantive acquisition.
During the LinkedIn acquisition, both Microsoft and LinkedIn using different channel and
media to communicate the motivation, goals, vision and mission of the acquisition.
Point 3 is about organizational structure and reporting line after the acquisition
process. There are differences of what happening after the acquisition process on the
50
organizational structure and reporting line. This point can be important or not that matters
when it comes to the post-acquisition process. Organizational structure of post-merger or
post-acquisition might help the newly formed company to survive and have healthy merger,
but up until this thesis was published, there is no clear answer how it affects the merger and
acquisition. This topic can lead to a new research topic on how new organizational structure
can be a successful factor in merger and acquisition.
Point 4 is about other form of business adjustment activities or business restructuring
process. Merger and acquisition is not the only way of how one company can expand and
grow their business. There are also other type of business adjustment activities that can be
considered as mentioned by Weston and Weaver (2001, p. 6) there are six type of activities
in order to expand and grow business: merges, tender offers, joint ventures, supplier
networks, alliances, investments and franchising. Tender offers is a method of making a
takeover via a direct offer to target firm shareholders. Joint ventures is a combination of
subsets of assets contributed by two (or more) business entities for a specific business
purpose and a limited duration. Supplier networks is long-term cooperative relationships.
Alliances is more informal interbusiness relations. Investments is a stake but not control in
another organization. Franchising is contracts for the use of name, reputation, business
format. Microsoft should have been more careful in taking important step if the company
want to have a large business deal. Every business adjustment activities or business
restructuring process is related with long-term company’s vision and mission. Therefore
other business restructuring options beside acquisition as previously mentioned could have
been considered by Microsoft.
Point 5 is about external environment. External environment can also be the influence
in company’s decision in merger and acquisition (both in buyer and seller’s side). As
mentioned by Fubini et. al (2007, p. 7), a host of external factors affect performance during
and after the integration, such as technology developments, moves of competitors and
business partners, and fluctuations in customer demand. That is why it is important for the
company to take into consideration for any decision regarding external environment when
they involve in merger and acquisition. In the LinkedIn acquisition, the external environment
consideration for having this acquisition are other social media (For example: Twitter and
Facebook) is not as promising as LinkedIn. Twitter’s growth has declined a lot due to spams
and automatic content. While Facebook has different target user for its business. Microsoft
deliberately considers that LinkedIn users keep increasing and also LinkedIn users which are
categorized as professionals, mostly used the Microsoft products. In the aQuantive
51
acquisition, the external environment was more likely because of the competitors’ moves.
Google and Yahoo also acquired marketing service and technology companies. Google
acquired Doubleclick in April 2007 and on the same month, Yahoo acquired RightMedia.
Point 6 is about experience. Large company like Microsoft has many experiences in
merger and acquisition. Microsoft started to expand its business by having merger and
acquisition since 1987 and keep continuing doing it until these days. Hundreds of companies
were already merged and acquisitioned which means that Microsoft should have learning
curve in having the experience of merger and acquisition. Even though it can’t be a guarantee
that many experience leads to a successful merger and acquisition. But at least, company
should learn from the past experiences of unhealthy or failed case for the potential merger
and acquisition process.
Point 7 is about the post-integration process. Microsoft and LinkedIn are still working
on the integration and it should be like as it is. When two companies have merger and
acquisition, it shouldn’t lose its brand originality and this is what happen with Microsoft and
LinkedIn. It also important to have continual innovation to create new level of creativity and
to keep the synergy works all the time. Again, the role of the CEO for the whole post-
integration process is crucial for its long-term goals.
52
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Case Study References
LinkedIn Acquisition by Microsoft
Press Release Microsoft retrieved on 7th October 2018 from:
https://news.microsoft.com/2016/06/13/microsoft-to-acquire-linkedin/
Press Release LinkedIn retrieved on 7th October 2018 from:
https://blog.linkedin.com/2016/06/13/microsoft-and-linkedin
Press Release European Commission retrieved on 7th October 2018 from:
http://europa.eu/rapid/press-release_IP-16-4284_en.htm
Acquisition presentation by Microsoft and LinkedIn retrieved on 7th October 2018
from: https://news.microsoft.com/uploads/2016/06/msft_announce_160613.pdf
Microsoft 2016-2018 Annual Report retrieved on 7th October 2018 from:
https://www.microsoft.com/en-us/Investor/annual-reports.aspx
LinkedIn 2015 Fourth Quarter 2015 and Full year 2015 Report retrieved on 7th October
2018 from: https://news.linkedin.com/2016/linkedin-announces-fourth-quarter-and-
full-year-2015-results
LinkedIn 2016 Third Quarter Report retrieved on 7th October 2018 from:
https://news.linkedin.com/2016/linkedin-announces-third-quarter-2016-results
LinkedIn proxy statement retrieved on 7th October 2018 from:
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14187_1prem14a.htm
Regulation (EC) No 139/2004 Merger Procedure retrieved on 7th October 2018 from:
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Email Jeff Weiner sent to LinkedIn’s global workforce retrieved on 7th October 2018
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https://news.microsoft.com/2016/06/13/satya-nadella-email-to-employees-on-
acquisition-of-linkedin/
Blog article from Jeff Weiner after acquisition complete retrieved on 24th October 2018
from: https://www.linkedin.com/pulse/linkedin-microsoft-our-next-play-begins-jeff-
weiner
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together-satya-nadella
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https://blog.linkedin.com/2018/september/25/new-linkedin-features-in-office-365-
help-you-build-relationships
https://blog.linkedin.com/2017/september/250/adding-linkedin_s-profile-card-on-
office-365-offers-a-simple-way
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54
Microsoft Financial Year 2019 Q2 Earning Release retrieved on 15th March from:
https://www.microsoft.com/en-us/Investor/earnings/FY-2019-Q2/press-release-
webcast
aQuantive Acquisition by Microsoft
Press Release Microsoft retrieved on 14th October 2018 from:
https://news.microsoft.com/2007/05/18/microsoft-to-acquire-aquantive-inc/
Press Release of completed acquisition by Microsoft retrieved on 14th October 2018
from: https://news.microsoft.com/2007/08/13/microsoft-completes-acquisition-of-
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https://www.microsoft.com/en-us/Investor/annual-reports.aspx
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company-founder-returns-role/
LinkedIn profile of aQuantives’s executives retrieved on 24th October 2018 from:
Brian McAndrews: https://www.linkedin.com/in/brian-mcandrews-340a5033
Mike Galgon: https://www.linkedin.com/in/mike-galgon-817374/
Karl Siebrecht: https://www.linkedin.com/in/karl-siebrecht-81188212/
News article on Microsoft Media Network Launching retrieved on 24th October 2018
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