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Microsoft-LinkedIn acquisition and the cultural difficulty of mergers and acquisitions

Mike Altendorf | July 7, 2016
Microsoft-LinkedIn acquisition and the cultural difficulty of M&As

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

Bigger fish

The sale of LinkedIn to Microsoft for the, some would say staggering, amount of $26.2 billion is the latest in quite a long line of acquisitions by the tech big boys keen to keep up with the digital giants. This one is notable not just for its size but because once again tha tthis seems quite incredible when you think that LinkedIn doesn't actually make a profit. It is also a bold move from a company whose last high profile acquisition was an unmitigated disaster, with a $7.6 billion writedown from its Nokia deal announced in July 2015.

The success of this latest deal will depend on a whole range of factors but what interests me most is how Microsoft will deal with the culture clash and the integration of two businesses who belong to such different generations.

Mergers have always been difficult to do successfully. I have first-hand experience of the difficulties involved in bringing together organisations of such different culture and ethos. It isn't just the physical and financial aspects (in fact in many ways these things are the most straightforward), it is the values and belief systems.

Companies like LinkedIn, that were born and grew up in a digital age, actually have far less of a physical infrastructure than more traditional companies. The market cap of companies like AirBnB and Uber compared to the number of people they employed and the offices they have is remarkable. You might therefore assume that this would make their acquisition easier.

This assumption would be a dangerous one however. Although physically the integration might be easier, culturally it is likely to be much, much harder.

In some ways the LinkedIn-Microsoft partnership is actually not the best example of what I am talking about. In digital terms LinkedIn is practically a pensioner. It was born right at the start of the digital transformation so culturally it is perhaps closer to a Microsoft than many that have come along since. However what it is not is a technology company and that in itself is a challenge.

When I talk about 'technology companies' I am referring to companies that make money selling technology products and services. That is very different from a technology-BASED organisation (like almost all digital ventures) that leverage technology to sell other products and services. Microsoft is definitely one of the former and although it is trying to reinvent itself, it is still lead by techies and mainly sold to techies too. LinkedIn is definitely one of the latter and this will mean there is a cultural divide. Technology companies have always struggled to get away from the product first approach - something that is an anathema to an organisation like LinkedIn for whom tech is the means to an end and not the end in itself.

 

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