Chris O'Brien has written a thought-provoking piece for Venture Beat about the Microsoft acquisition of LinkedIn. O'Brien has a bearish outlook on the deal. In his article, he cites many reasons why the deal may not work out, including the fact that Microsoft has had a less-than-stellar record of making major deals (Skype, Nokia, Yammer). I don't know if I'm quite as bearish as O'Brien on the deal, but I certainly have some doubts. What I found most interesting, though, was O'Brien's take on the issue of how Microsoft will manage LinkedIn going forward. Here's an excerpt, in which O'Brien describes the "acquisition double-talk" taking place at Microsoft:
Acquisition double-talk, part 1: On the one hand, this deal is all about the oft-vaunted idea of “synergy” (even if that word is not used). The idea is presumably to build LinkedIn into all sorts of Microsoft products. Great! But, does this mean I’m going to get all sorts of messages suddenly asking if I want to share my Word doc through LinkedIn or have some LinkedIn integration with an Excel spreadsheet…or…what? There’s a lot of talk today about how this is going to broaden Microsoft’s reach into all sorts of new channels for selling stuff like cloud services. But does one of the largest tech companies in the world really need to spend $26 billion to reach new customers?
Acquisition double talk, part 2: Structurally, LinkedIn is going to remain independent. Per the Nadella memo:
“LinkedIn will retain its distinct brand and independence, as well as their culture which is very much aligned with ours. Jeff (Weiner) will continue to be CEO of LinkedIn, he’ll report to me and join our senior leadership team. In essence, what I’ve asked Jeff to do is manage LinkedIn with key performance metrics that accrue to our overall success. He’ll decide from there what makes sense to integrate and what does not.”
So, we will all work together. But we will work together while remaining separate. We call it: Separate Togetherness. (I’m going to copyright that and write a book on it one day.)
O'Brien raises an interesting issue that arises in many acquisitions. On the one hand, the acquirer wishes to realize substantial synergies. After all, those synergies are the very reason why the acquirer pays a large premium to purchase the target firm. On the other hand, the acquirer does not want to spoil all that is good about the target firm. Thus, they promise to provide the target firm a great deal of autonomy moving forward. They promise to keep it separate. You can see the conundrum here. Keeping it separate means probably forgoing key synergy opportunities. Pressing for too many synergies too quickly might alienate employees at the target firm, infringe on the innovative culture of the target, etc. One also has to raise a broader question though: If you are going to manage the target separately, then could you have achieved many of the collaborative benefits without actually acquiring the firm. Could you have pursued some other organizational arrangement, such as a strategic alliance? Could you collaborate, but without the risks and costs associated with a merger?