Salesforce Bid Pushed Microsoft to Up its Offer on LinkedIn

During the two months of negotiation, Microsoft Corp. was forced to raise their offer for LinkedIn Corp. by 22% or approximately $5 billion due to persistent bidding from Salesforce.com Inc. This information was provided by a person with knowledge of the matter and also revealed through a regulatory filing made by the social network. Ultimately, the software giant agreed to purchase LinkedIn for $26 billion last month or roughly $196 per share in cash. This was about 50% premium over the stock price of LinkedIn before the deal was announced.

On Friday, a filing by LinkedIn with the Securities and Exchange Commission disclosed that a nonbinding indication of interest had been submitted by Microsoft on May 4th for acquiring LinkedIn for $160 per share in cash. Nine days before, another company dubbed as ‘Party A’ by LinkedIn had also submitted their own nonbinding indication of interest for buying the company for $160 to $165 per share in a combination of stock and cash. It had been previously reported by numerous publications that the other bidder had been Salesforce. Sources familiar with the matter confirmed that Party A was indeed Salesforce. Due to their bid, Microsoft was pressurized to give its offer a boost a number of times.

Salesforce continues to push its bid even after LinkedIn had agreed to an arrangement of negotiating exclusively with Microsoft. The company’s stock price climbed, which meant that the value of the offer also grew and LinkedIn was able to pressurize Microsoft into raising their bid. It was also disclosed by the social network that a third party dubbed as ‘Party B’ had also entered a confidentiality agreement for buying the company after its heads met with LinkedIn’s chairman and controlling shareholder Reid Hoffman and its Chief Executive, Jeff Weiner. As the bids began rolling in during May, Party B chose to withdraw without making an offer and said that they were interested in teaming up with the social network.

Initial offers were submitted by Microsoft and Salesforce on May 6th and LinkedIn formed both bidders that it would enter into exclusive negotiation with the one who raised their offer to $200 per share. Both companies didn’t budge, which led to a bidding war that forced the software giant to keep pace with the steadily climbing sales price of LinkedIn. Ultimately, it led to the generous winning offer by Microsoft. Three days later, Mr. Hoffman met with Microsoft’s company director and co-founder Bill Gates.

According to the filing, the pair discussed the potential benefits to Microsoft through the acquisition of LinkedIn. They also talked about the potential involvement of Mr. Hoffman after the acquisition, which also included the possibility of him serving as one of the board of directors at Microsoft. Salesforce also raised its offer to $171 per share in stock and cash in the same week whereas Microsoft went as high as $172 per share in cash. Both companies said that they were not interested in participating in an auction and wanted LinkedIn to go for an acceptable price.