Microsoft has announced recently that they have purchased the enterprise social network LinkedIn in a deal valued at $26.2 billion. The tech giant’s biggest purchase comes under Chief Executive Satya Nadella, who is reshaping Microsoft since taking over in 2014, to appeal more to business customers with cloud-based services and productivity tools. Microsoft will now pay $196 per share in an all-cash deal, including LinkedIn’s net cash. This is a 49.5% premium to the social network’s closing price on Friday.

LinkedIn will retain its brand, culture and independence and Jeff Weiner will remain the chief executive officer, Microsoft said in a statement. The offer values LinkedIn about 91 times earnings before interest, taxes, depreciation and amortisation, according to data compiled by Bloomberg. In a memo to the Microsoft staff, Nadella described the deal as the ‘key to our bold ambition to reinvent productivity and business processes’.

LinkedIn is not an obvious fit in the ongoing restructuring, but gives Microsoft the biggest global social network for professionals that is used by job seekers, recruiters and human resources team. “Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works,” Weiner said in the statement.

In India, the acquisition is likely to put the spotlight on the professional network’s operations here, where it launched a tech centre in India in June. LinkedIn currently has over 650 employees in India and a user base of over 35 million. Microsoft has offices at nine locations across India. Its main campus in Hyderabad houses research and development, IT, and global services. The sales and marketing unit is headquartered in Gurgaon, while research and technical support centres are based in Bangalore and employs about 6000 persons.

“The deal continues the soft revolution that Satya Nadella has been driving since he took over as the CEO. He has been pivoting on cloud, internet services and making Microsoft into a 21st century business and what better community than LinkedIn to take it forward. My belief is that the acquisition is not just about a social networking play and has a much wider fit into the enterprise piece,” said Jaideep Mehta, the Managing Director, IDC India and South Asia. Microsoft plans to speed-up monetisation of LinkedIn by growing individual and organisation subscriptions as well as targeted advertising.

Microsoft agrees to buy LinkedIn for $26.2 billion

In his memo, Nadella described the deal as the ‘next step forward’ for Microsoft Office. “Over the past decade, we have moved Office to a set of productivity tools to a cloud service across any platform and device. This deal is the next step forward for Office 365 and Dynamics as they connect to the world’s largest and most valuable professional network,” wrote Nadella. “In essence, we can reinvent ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes.”

LinkedIn made a spectacular entry in May 2011, the biggest since Google went public in 2004. The company’s shares peaked in February 2016, but have since then lost almost half their value after a tepid 2016 forecast. “I think, first of all, (LinkedIn) is a great business, even though the company stubbed their toe back in February,” said Ivan Feinseth, analyst at Tigress Financial Partners. “It is a premium company and it deserves a premium valuation.”

The deal, which won the unanimous support of both boards, is expected to close this year, the companies said. Microsoft said it would issue new debt to fund its acquisition. After the deal, which will require approval from regulators in the US, the EU, Canada and Brazil, LinkedIn will become part of Microsoft’s productivity and business processes unit, the companies said.

The country is the second biggest base for the professional biggest base for the professional networking site, with 35 million registered members. That is up 10 times from 3.4 million in 2009, the year it opened its office in India. That equates to a compounded annual growth rate of 40% in these seven years. Earlier this month, it opened a bigger R&D and engineering facility in Bangalore, its biggest in Asia, with plans to have more localized content and develop technology to make it easier to access LinkedIn on 2G connections.

In India, it has invested in three data centres, and Microsoft India chairman Bhaskar Pramanik said that India is one of the first countries outside the US where the company has made such big investments in data centres. “It will be one of the largest footprints in terms of data centre capacity in India. In terms of scale, scope and capability, we are going to change the way computing will happen here,” he had said Cloud usage in India is growing dramatically, as evident in the establishment of big data centres not only by Microsoft , but also by the likes of Amazon and IBM.

Public cloud data centres are emerging as enterprises move their workloads to the cloud, rather than keep them on internal servers, which is both capital intensive (requires real estate and purchase of expensive hardware and software) and operationally expensive (because of the need to hire an army of IT staff to maintain the systems and pay for expensive power and air-conditioning to cool the systems).
Connecting LinkedIn to Microsoft Office 365 can help the attendees of meetings learn more about one another directly from invitations in their calendars. Sales representatives using Office can pick up useful tits and bits of background on potential customers from LinkedIn data. These elements of cloud also make it very attractive for small enterprises. For banks and government, data centres in India are essential because of regulations that prohibit the movement of many kinds of data that they deal with beyond the geographic boundaries of the country.