LinkedIn tops social-media acquisitions in history

Steven Loeb · June 15, 2016 · Short URL:

The $26.2 billion price tag beats out the $21.8 billion that Facebook paid for WhatsApp

The big news on Monday was that LinkedIn, a publicly-traded company, and one of the top social networks in the world, had been acquired by Microsoft. The company was acquired for $26.2 billion, or $196 per share, a 50 percent premium above LinkedIn's closing price before the deal was announced, and a price that some believe is too high.

That includes BMO analyst Keith Bachman who, in a note, said he views the deal price as expensive, and wondered if Microsoft could have used the capital on other cloud assets.

He noted that he was neutral to negative on the deal, questioning the fit of LinkedIn compared to what else Microsoft could have purchased for $26 billion, suggesting several incremental SaaS application purchases instead.

In terms of price-to-revenue multiple, the deal values LinkedIn higher than Twitter, but lower than Facebook, on a price-to-revenue multoiple.

JP Morgan analyst Doug Anmuth pegged the purchase price of LinkedIn at 7.2x estimated 2016 revenue and 6.3x estimated 2017 revenue.

Facebook currently sits at a market cap of $331.36 billion, with estimated 2016 revenue of $26.04 billion, giving it a price-to-revenue multiple of 12.7x. Its estimated 2017 revenue is $34.69 billion, giving it a multiple of 9.6x. 

Twitter, meanwhile, has a market cap of $12.02 billion, with estimated 2016 revenue of $2.72 billion for a 4.4x multiple. The company is expected to make $3.28 billion in 2017, for a 3.7x multiple. 

No matter how you cut it, though, the price is high on an absolute-price-basis. In fact, it's the biggest deal in social media history, beating out Facebook's $21.8 billion purchase of WhatsApp in February of 2014.

That deal was originally pegged at $16 billion, including $4 billion in cash, along with approximately $12 billion worth of Facebook shares, but Facebook added another $3.6 billion to the price to compensate WhatsApp employees for staying on. The company's stock rose so much by the time the deal was finalized that the final sale price went up by an additional $1.7 billion. 

Here's an interesting stat: Microsoft is paying almost $250 for each of LinkedIn's monthy active users, and about $60 per registered members. Facebook, on the other hand, paid $42 for every WhatsApp user. 

After that, the deal prices fall fast. There's Google's acquisition of YouTube, for $1.65 billion in a stock-for-stock transaction in 2006. There's also LinkedIn's own purchase of education company last year for $1.5 billion.

There have only been a few other social transactions for $1 billion and above: Microsoft's acquisition of Yammer for $1.2 billion in 2012; Yahoo's $1.1 billion acquisition of Tumblr in 2013, and Facebook's $1 billion acquisition of Instagram in 2012.

A few others have come close, such as when Google bought Waze in 2013, for example, the final price was $966 million, and Twitter is said to have paid $970 million when it bought Vine in 2012. With less than acquisitions of at least $1 billion in the social space, though, deals like these are very rare, and nearly all of them have happened since 2012, with the only exception being the two acquisitions of Skype.  hance its Office 365 commercial and Dynamics businesses. 

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