People outside the business world often think about a particular business in very black-and-white ways. It's either a success or a failure, failing or thriving. But a business doesn't just run at two speeds. There are peaks, valleys and plateaus, and business owners must adjust to each of these situations.
For instance, recently, tech giant Microsoft acquired professional networking site LinkedIn in a $26.2 billion deal. There are a few takeaways from this deal that could help readers of this blog assess their own options in terms of business acquisitions.
To begin with, LinkedIn wasn't exactly a failing business in desperate need of saving. In fact, according to The Economist, it is the largest site of its kind and has roughly 430 million users. However, the company had hit some problems. In recent years, growth has slowed, share prices dropped and problems with stock-based compensation were jeopardizing its revenue. Acquisition by Microsoft could revitalize the company and stimulate growth.
It is also important to note that acquisitions can be most successful when each party benefits. In this case, Microsoft gains the professional networking data and scientists from LinkedIn while LinkedIn gains the powerful backing and resources available from Microsoft.
Readers can also learn a lesson about caution from this deal. Similar acquisitions by Microsoft in the past have been fairly unsuccessful, and LinkedIn's reputation among some businesses is not positive. While a deal might seem great on paper and the promises made by each company can be made in earnest, the fact is only time will tell when it comes to knowing if an acquisition was a good decision.
With all this in mind, we hope that readers understand that businesses can benefit a great deal from business transactions including acquisitions if they are done properly; however, there is no guarantee that a deal will be a success. You can do yourself and your company a great service by entering these negotiations and agreements with open eyes, legal guidance and managed expectations of what you stand to gain or lose.