Money pile

The big news this week was the purchase of LinkedIn by Microsoft for $26 billion.

Selling your business to a strategic buyer guarantees that you maximize your exit and hit the jackpot even if your last accounts show a $165 million loss!

What, if any, lessons can small business owners learn?

There has been enormous press commentary on the benefits, or otherwise, but can you, as a small business owner, gain any insights of what a strategic buyer represents?

Microsoft’s chief executive, Satya Nadella  is betting that social networks will be at the centre of our professional lives.

In addition, he believes it will significantly bolster Microsoft’s products that must take over from their fading mainstays such as Windows if the company is to survive and prosper in the long term.

LinkedIn was founded by Reid Hoffman in 2002.

It helps people find new jobs and also gives leads to recruiters and salespeople looking to sell products and services to businesses.

It has 433 million members of whom 105 million use it at least every month.

Critically, 60% of usage is on mobile devices which is an important metric given how much time professionals spend on their smartphones.

Microsoft are paying $255 per active user. Is this expensive?

Naturally Nadella is positive by stating the deal widens the market for Microsoft products and it gives the business access to the social network phenomenon.

So what lessons, as small business owners, can you learn so you can maximize your exit?

The bad news is that strategic buyers only represent about 5% of all business sales.

The good news they pay ‘premium prices’….life changing for the owners.

One type of acquisition from a strategic buyer is where the acquired assets and capabilities are combined with existing assets to generate new business or to save costs. Is this what Microsoft and LinkedIn are doing?

Possibly but the concrete synergies are hard to see given the $9 billion ‘premium’ they are paying over LinkedIn’s market values as of last week.

The only numbers spoken about are $150 million in annual savings by 2018….small change and not significant in the context of the deal.

Maybe Microsoft aren’t promoting the value-creation potential of a strategic remix because it’s record on large deals is poor.

It squandered over $6 billion on aQuantitive, an online advertising platform in 2007 and over $7 billion on Nokia’s handset business in 2014.

LinkedIn CEO, Jeff Werner, may have had Microsoft’s experience in mind when he assured his employees that their owner would grant LinkedIn ‘independence’. This implies that full and close integration of services and software is explicitly being ruled out at this point.

This leads to another form of strategic acquisition.

In this instance, the business acquires businesses or technologies that have promise but are still risky. It nurtures them to see where they lead.

It’s a numbers game but the idea is to keep the businesses relatively independent and to provide them with capital and management that will support their growth.

It’s the Google / Alphabet model.

It’s striking that in his letter to employees, Jeff Werner cites Google’s acquisition of YouTube as a model for this deal. Youtube was acquired by Google but allowed the video business to exist relatively independent of other Google businesses.

So what can small business owners learn about strategic buyers?:

  1. They buy ‘teams’ – LinkedIn has an enviable team of data scientists.
  2. They pay cash – LinkedIn are paying cash [ they intend to borrow although they have $100 billion in cash].
  3. The financial numbers aren’t critical. LinkedIn made a loss of $165 million in 2015.

If want to discover the ‘secrets’ to maximize your exit and receive a 75% discount the go to

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