In the world of mergers and acquisitions, a huge deal in the social networking industry was announced on Monday when Microsoft said it would acquire LinkedIn, the social networking site for professionals that has over 433 million members for the price of $26.2 billion equal to $196 a share in cash.

The offer of $196 is a huge premium on the Friday closing prices of LinkedIn of $131.08. During trading prior to the bell, the price of LinkedIn surged by 64% to reach the price per share that Microsoft agreed to pay.

LinkedIn will keep its branding as well as it product and is to become one part of the business and productivity process segment of Microsoft. The CEO at LinkedIn Jeff Weiner is to report directly to Microsoft CEO Satya Nadella.

For both companies, this acquisition is huge. For Microsoft, it brings a missing piece that is key into the strategy of the company that is to build out additional services for enterprises.

The focus today of the company is software as well as a little hardware through the downsized mobile phones business.

The LinkedIn acquisition gives it a much bigger reach in social networking services as well as professional content that develop further its lines of communications products, which was spearheaded with its Yammer acquisition.

It also gives it a possible sales channel to increase sales of its products as well as be a complement to those it already has on offer for communication and collaboration.

For LinkedIn, this puts to bed any questions of how the business would be able to compete with other companies that build more software over and above their social platforms that would put it competition versus LinkedIn.

For a period, it looked as though that was the direction LinkedIn was hoping to develop, but of more recent time problems with revenue and user growth, and a drop in its price per share, put the business on the defensive.

Even though LinkedIn has seen some drop in its stock price of late, it does not reflect a failing company that has been scooped up for parts as it is on its way down.

LinkedIn even with a price per share below its high point for 12 months of $258 per share, is a strong performing tech company that appear on the public market.

Microsoft has not had great success where social networking is concerned, although it invested smartly in Facebook prior to it going public. However, it will now have its own foothold in this industry.

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