![]() ![]() Both companies have repeatedly said they expect the deal to close by the end of the year - so in less than two months. Returning to the case of LinkedIn, the risk-return profile appears quite favorable for a few reasons. The strategy has been demonstrated to be uncorrelated to the broader stock market, and it has been used to create immense profits for its investors. This is something of an oversimplification of the strategy - merger arbitrage often involves hedging out certain risks and adding leverage to magnify returns. Without delving too deep into the strategy, merger arbitrage involves buying the stocks of to-be-acquired companies to collect that minute gap when the buyout deal closes. It's called merger arbitrage, and it's a proven strategy that hedge funds have used to create immense wealth for their billionaire owners. But "unlikely" is a far cry from impossible, and that "certainty gap" between those two situations is what creates the $7-$8 spread between LinkedIn's current stock price and its pre-determined buyout share price.Īn entire sub-specialization in investing already exists to profit from these exact situations. Sure, each of these situations seems highly unlikely in the near term. Microsoft, for some inexplicable reason, could suddenly become unable to borrow the $26.2 billion in debt it plans to use to finance the buyout. A Federal Reserve interest rate decision could somehow change market conditions. A recession could start for any number of reasons. Though the deal seems overwhelmingly likely to close, any number of unforeseen or unexpected events could still scupper the deal. ![]() It just removes one of the largest observable pitfalls from the process. To be clear, receiving all the necessary approval for the deal to proceed still doesn't make Microsoft's purchase of LinkedIn certain. So while gaining EU regulatory approval remains a critical risk, it also strikes me as fairly likely to occur, leaving few clearly observable risks to the deal remaining. ![]() Furthermore, EU regulators also similarly examined and ultimately approved other landmark tech deals including Google's purchase of DoubleClick and Facebook's WhatsApp buyout.Especially with other major regulators having already approved the deal, few precedents exist of the EU blocking major mergers on this kind of grounds. ![]() They also point out that other social media companies, particularly Facebook, also collect massive user data sets that could be tapped as an alternate source for future technological development. #Linkedin stock full#However, those in Microsoft's corner are quick to note that outside companies like Salesforce have never had full access to LinkedIn's data set. #Linkedin stock software#claims allowing Microsoft exclusive access to LinkedIn's data could provide it with an outsized advantage in the development of AI-powered technologies that could eventually yield a major advantage across many applications, particularly the market for CRM software where Salesforce and Microsoft currently compete. For context, large sets of user profile data are especially critical in developing still-emerging technologies like artificial intelligence. The EU's antitrust regulator is currently examining the deal and has set a preliminary deadline to conclude its review by November 22nd, though this date can be extended should the EU opt to further scrutinize its competitive implications.Īt the heart of the EU's concerns is LinkedIn's massive data set, which rivals like ( CRM -2.09%) are howling could provide Microsoft an outsized advantage in the years to come. The lone major regulator that analysts fear could derail the Microsoft-LinkedIn deal is the European Union. Case in point, regulators in the U.S., Canada, and Brazil have all signed-off on the deal. In terms of significant events remaining, it appears gaining regulatory approval remains the lone major factor that could upend the deal, and even this risk seems relatively diminutive this far along in the process. Check yet another significant obstacle off the list. LinkedIn shareholders already voted in an overwhelming majority to accept the deal in August, so gaining the necessary approval from investors - a major potential hurdle - is no longer a factor. This far along in the process, few major obstacles exist that could sink Microsoft's LinkedIn buyout. Microsoft's LinkedIn deal still needs 1 key regulator's approval However, this uncertainty exists for a far lesser degree in the case of LinkedIn and Microsoft. That's certainly the case in most merger scenarios. As the thinking goes, unknown factors could arise and sink the merger, probably resulting in a loss of some or all of the 49.5% premium Microsoft offered as an incentive to close the acquisition. So why does this gap between stock price and merger price exist? ![]()
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