How the Microsoft-LinkedIn Connection Was Made

By Deepa Seetharaman and Jay Greene

Early this year, Microsoft Corp. CEO Satya Nadella arrived at LinkedIn Corp.'s headquarters ostensibly to discuss possible partnerships. The meeting rapidly evolved into something more serious.

Mr. Nadella and LinkedIn Chief Executive Jeff Weiner saw a lot of similarities between their strategic visions, and Mr. Nadella ended up floating the idea of an acquisition at the February meeting, according to people familiar with the matter.

As they hashed out details over the ensuing months, they managed to keep it secret right up to Monday's announcement that the deal had come to fruition. Microsoft said it would buy LinkedIn for $26.2 billion in cash, its largest deal to date. The deal allows LinkedIn to focus its attention on product development after more than a year of inconsistent results, analysts said.

Mr. Nadella and Mr. Weiner first met at summit of CEOs hosted by Microsoft several years ago, and Mr. Weiner admired how the Microsoft boss had steered the company since taking over, the people said.

The meeting where the deal talks started came in the month that LinkedIn delivered a weak earnings outlook, on Feb. 4, that indicated its growth was slowing. The prognosis rattled investors, who sold off the stock in droves. At one point, three years of share gains were wiped away.

In their meeting, Mr. Nadella and Mr. Weiner discussed their approaches for tackling the enterprise market. The two later started to discuss how such a deal would be structured.

"When Satya first proposed the idea of acquiring LinkedIn, he said it was absolutely essential that we had alignment on two things: Purpose and structure," Mr. Weiner said in a letter to employees sent Monday. "It didn't take long before the two of us realized we had virtually identical mission statements," he wrote, adding: "Essentially, we're both trying to do the same thing but coming at it from two different places. For LinkedIn, it's the professional network, and for Microsoft, the professional cloud."

Few tech acquisitions go smoothly, and Mr. Weiner wrote he was aware of this dismal track record. But he said Mr. Nadella won him over by offering to allow LinkedIn to operate as a fully independent entity within Microsoft, similar to the way YouTube operates within Alphabet Inc. and the way Instagram and WhatsApp function within Facebook Inc.

"Long story short, Satya had me at 'independence'," Mr. Weiner wrote.

Their rapport grew over the recent months of negotiations, in which LinkedIn co-founder and controlling shareholder Reid Hoffman also played a role, one of the people said. In April, the three of them and Microsoft executive Qi Lu, who had worked with Mr. Weiner previously at Yahoo Inc., met for dinner, spending much of the evening digging into the mission, purpose and potential scenarios, said two people familiar with that meeting.

The Microsoft and LinkedIn executive teams had dinner again at Mr. Hoffman's home Sunday night. They each shared something that wasn't on their LinkedIn profile.

Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com and Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

June 13, 2016 19:34 ET (23:34 GMT)

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