In its largest deal ever, yesterday Microsoft (NASDAQ: MSFT) announced that it is buying professional network LinkedIn for $26.2 billion, or $196 per share, in an all-cash transaction. According to the announcement, LinkedIn “will retain its distinct brand, culture and independence,” and Jeff Weiner will remain CEO. He will report to Microsoft CEO Satya Nadella.

The boards of both companies unanimously approved the deal. The sale is expected to be finalized by year end, provided it satisfies all the necessary regulatory hurdles and LinkedIn’s shareholders approve the deal.

Reid Hoffman, chairman of the board, co-founder and controlling shareholder of LinkedIn, commented on the sale:

“Today is a re-founding moment for LinkedIn. I see incredible opportunity for our members and customers and look forward to supporting this new and combined business,” said Hoffman. “I fully support this transaction and the Board’s decision to pursue it, and will vote my shares in accordance with their recommendation on it.”

Nadella explained how the discussion transpired in a video interview with Weiner.

“As I thought about it more in terms of what it is that is most needed in today’s world, for sure, I’m a deep believer in productivity tools and communication tools, because that’s what empowers people to be able to be great at their jobs,” Nadella said.

“But think about taking that and connecting it with a professional network and really having the entirety of what is your professional life be enhanced, more empowered, where you are acquiring new skills and being more successful in your current job and finding a greater, bigger next job. That’s that vision,” Nadella added.

As the two companies began their negotiations, Weiner said it was critical that the companies align in two key areas: purpose and structure.

“It was after the purpose discussion and we started brainstorming a bit on all the things we could do together where there was a lot of excitement,” Weiner said. “It’s not just about sitting back and reacting to this. Satya said time and time again, ‘You guys have to help write the rules. We’re going to do this different. You’re going to have your independence. We have the shared sense of alignment, so let’s dream big. Let’s think about what’s possible, and that’s going to be the first principle.'”

According to The Seattle Times, this purchase is the largest acquisition in Microsoft’s history and the first big deal under the direction of Nadella. The deal will help Microsoft to round out its offering of online business services by adding a built-in professional network.

Insider Take:

LinkedIn is a frequent topic at Subscription Insider because of its subscription components. Most recently, we covered LinkedIn’s April acquisition of a data center in Singapore to support the company’s growth into the Asia Pacific region. In February, we reported on LinkedIn’s year-end results. While the company experienced growth in some areas, overall it lost $164.7 million last year, compared to a $3 million profit the prior year. LinkedIn needed financial help.

That said, LinkedIn also has expertise and resources that could be useful to Microsoft. When managed the right way and with solid financial backing, this partnership could be incredibly beneficial to both companies. LinkedIn will become part of Microsoft and, with that, have access to Microsoft’s resources which could allow the LinkedIn brand to maximize those services that have the most growth potential. LinkedIn can also benefit from Microsoft’s technology expertise as it continues to improve the user experience.

At the same time, Microsoft can add a few more tools to its business suite to expand its usefulness to its target audience. Also, as Microsoft moves further into the subscription business and away from its reliance on product sales, the company can benefit from LinkedIn’s subscription experience. While there is some reluctance to see a huge company get even bigger, it is exciting to see how Microsoft and LinkedIn can partner and learn from each other while better serving business users.