
LinkedIn Schedule 14A: Background of the Merger - troydavis
https://www.sec.gov/Archives/edgar/data/1271024/000110465916130837/a16-14187_1prem14a.htm#BackgroundoftheMerger_090652
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0xmohit

      On March 15, 2016, Mr. Weiner called Mr. Nadella to inquire as
      to whether Microsoft was interested in discussing further a
      potential acquisition of LinkedIn, and explained that, although
      LinkedIn was not for sale, others had expressed interest in an
      acquisition.
    

Amusing, indeed. Maybe this is how M&A happen.

~~~
jonathankoren
Of course it is. It's clear they started shopping the company immediately
after the collapse. Also, you never say "Hey, you want to buy us?", because
that reeks of desperation and scares off all potential buyers.

Out of curiosity, how did you think business deals happen?

~~~
marcusgarvey
Which collapse do you mean?

~~~
jonathankoren
The stock price collapse.

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sly010
For folks with less time, I really enjoyed the "Acquired" podcast's
walkthrough of this same acquisition step by step. They used this same SEC
filing as a source, I believe.

[0]
[http://www.acquired.fm/episodes/2016/6/16/episode-14-linkedi...](http://www.acquired.fm/episodes/2016/6/16/episode-14-linkedin)

~~~
sandstrom
They didn't discuss anything from the SEC filing (some of the subject
overlapped, but I don't think they'd read it, and they never referred to the
filing).

~~~
sly010
I remember a podcast discussing the topic, even speculating at the different
parties. I also remember the Acquired podcast discussing the acquisition. They
even have a link to a (different) document at SEC's website. My mind must have
pieced it all together. Apologies, I listen to a lot of podcasts.

Let's see if I can actually find the podcast I am thinking about...

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stygiansonic
I believe this was previously reported on back in July, when this regulatory
filing was made.

Recode had some information about who the parties were: [0]

 _" The SEC filing does not list the other bidders, but instead refers to
interested companies as Party A, Party B, Party C and Party D. We’re told that
Party B is Google, and Party D is Facebook. Party A is Salesforce, and we were
unable to identify Party C."_

Nonetheless, the SEC filing provides the original narrative into how the deal
was negotiated and is quite interesting in its own right.

0\. [http://www.recode.net/2016/7/1/12085946/google-facebook-
sale...](http://www.recode.net/2016/7/1/12085946/google-facebook-salesforce-
linkedin-acquisition)

~~~
dibstern
Awesome, thank you!

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karakal
How did Microsoft know A's offer when it submitted its counter offer?

May 9, 2016, Party A submitted a revised proposal to LinkedIn providing for an
acquisition of LinkedIn for $171 per share of LinkedIn common stock, with half
of the consideration in cash and half in Party A common stock.

On May 11, 2016, Microsoft submitted a revised proposal to acquire LinkedIn,
which provided for an acquisition of LinkedIn for $172 in cash per share of
LinkedIn common stock

~~~
dibstern
Parties are likely notified of other party's offers, unless the offer
prohibits it, which LinkedIn likely wouldn't have accepted as it had a hot
bidding war on its hands.

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arikr
This is an easy summary of this exact SEC doc:

[http://www.recode.net/2016/7/2/12085428/linkedin-
microsoft-s...](http://www.recode.net/2016/7/2/12085428/linkedin-microsoft-
salesforce-google-deal-timeline)

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rainboiboi
Just curious, is it normal for SEC filing to document the M&A negotiation
process like this one?

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hkhanna
M&A lawyer here. Yes, in a public company acquisition, a vote of the
shareholders of the acquired company is typically required. Part of the
required disclosure to those shareholders before the vote is the "Background
of the Merger" which describes the negotiation process in detail.

~~~
yuhong
I really wish the restrictions can be reduced or removed so board of directors
(like @pmarca) can tweet more on public companies.

~~~
dibstern
What restrictions are you talking about?

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pdq
Why do they call this a merger instead of an acquisition?

I assume merger means two companies merging into a new third company, versus
acquisition being a larger company acquiring a smaller company into a new
business unit of the parent company.

~~~
hkhanna
M&A lawyer here. Two companies merging into a new third company is called a
"consolidation" rather than a merger and its not very common, especially when
public companies are involved.

A "merger" is when one company merges into another and one of the two
companies thereby goes out of existence.

That may strike you as strange here since both LinkedIn and Microsoft will
continue to exist post-merger. But to "acquire" all of a company you need to
acquire all of its shares. But when a company is widely held like LinkedIn,
you're probably not going to get every last shareholder to tender over their
shares.

So you structure the deal as a merger: Microsoft forms a shell subsidiary
("Merger Sub") that merges with and into LinkedIn. (Lawyers call this a
"reverse triangular merger.") If a majority of LinkedIn shareholders approve
the merger, all shareholders are bound to it. In this way, a majority of
shareholders can force all the rest of the shareholders to sell to Microsoft.

The Merger Sub is necessary since 1) both Microsoft and LinkedIn want to
continue to exist and a merger requires that an entity blinks out of existence
and 2) a vote of the shareholders of Microsoft is not required since Microsoft
is not directly merging with anybody.

~~~
Pyxl101
A very interesting explanation, thank you!

Could you elaborate on how this results in Microsoft having control over the
post-merger LinkedIn?

~~~
hkhanna
Certainly. As I mentioned above, Microsoft forms a shell company ("Merger
Sub") which is the entity that actually merges with and into LinkedIn.

When Microsoft forms the shell company, it actually incorporates a new
company, usually in Delaware, and that new company issues all of its stock to
Microsoft, which, since it's a brand new corporation, could be one share or
ten million shares, it doesn't matter, since Microsoft owns all of it. Merger
Sub, which doesn't operate any business, is now a wholly-owned subsidiary of
Microsoft since Microsoft owns all of the stock of Merger Sub.

The Merger Agreement, signed by Microsoft, LinkedIn and Merger Sub, governs
what happens to this stock of Merger Sub (and the stock of LinkedIn) at the
moment Merger Sub merges into LinkedIn and out of existence. Although I
haven't read it in detail for this deal, what typically happens in a reverse
triangular merger is that the Merger Agreement will say that all of the
outstanding stock of Merger Sub will automatically convert into stock of
LinkedIn. It will also say that all of the outstanding stock of LinkedIn (held
by the public shareholders) will convert into a right to receive the "per
share merger consideration", which is basically that shareholder's portion of
the cash Microsoft paid for LinkedIn ($196 per share, in this case).

When the dust settles, then, Microsoft will own all the outstanding shares of
LinkedIn, since Merger Sub's shares converted into them when Merger Sub was
merged out of existence. The former LinkedIn shares held by the public now is
just a right to receive some cash and no longer represents ownership in
LinkedIn.

With Microsoft now owning 100% of LinkedIn's shares, in theory, it could elect
its own board of directors of LinkedIn, thus giving them control of the
company.

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FT_intern
Party A = Salesforce?

Other parties = Google, Oracle, Facebook?

~~~
jonathankoren
Salesforce was absolutely in the mix.

This also motivates Salesforce's Quip acquisition. Why do you think anyone
would pay for a super crappy google doc clone who's only selling point is
"We're not Google, and you are afraid of Google."

~~~
blahi
They are afraid of Microsoft, not Google.

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jonathankoren
Excuse me. Are you from the past?

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blahi
No, from the future, actually.

