Microsoft, LinkedIn deal buoyed as EU ‘market tests’ concessions

First published on MLex 18 November 2016. By Dafydd Nelson.

Microsoft’s prospects of securing swift EU approval to buy LinkedIn appear much brighter following the European Commission’s decision to seek industry feedback on an offer to amend the $26.2 billion deal.

Market responses to the US software maker’s offer will be a critical factor in determining whether the LinkedIn takeover can close this year, as Microsoft executives hope.

A decision by the commission to “market test” concessions during a first-phase review usually results in a merger gaining EU approval without being subjected to an in-depth probe, an MLex analysis of previous investigations shows.

But “usually” doesn’t mean “always.” Some recent investigations have slipped into phase II even though the EU watchdog sought views on a phase I remedy. The most recent example occurred when John Malone’s Liberty Global bought wireless network operator Base, a review finally wrapped up in February this year.

To allay European Commission concerns about the LinkedIn transaction, Microsoft has promised not to discriminate against other professional social networks. It has also said it would offer computer makers the ability to untie LinkedIn from its software.

According to the EU regulator’s register of notified deals, Microsoft formally submitted the remedy package on Tuesday, Nov. 15. The commission has until Dec. 6 to decide whether to clear the deal or open an in-depth review.

A move to open phase II would be considerably out of step with decisions taken by other regulators who have looked at the LinkedIn buyout.

Competition authorities in the US, Canada and Brazil have already approved the deal unconditionally. So Microsoft’s remedy offer in Brussels already marks a departure, though perhaps not such a significant one.

Throughout the EU review, Salesforce.com has voiced open concerns that Microsoft will keep certain LinkedIn data for itself, enabling the buyer to produce better computer programs for handling customer relationship management, thereby harming rivals.

Redmond, Washington-based Microsoft is probably confident that the EU has no serious misgivings about those issues. But industry participants are likely to complain about the remedy offer. If necessary, Microsoft will have an opportunity to amend the concessions before the EU’s initial review deadline.

This augurs well for Microsoft’s chances of winning phase I clearance. Only nine reviews in the past five years have been pushed into phase II after the notifying party lodged a formal remedy during an initial assessment, according to an MLex analysis. In most of those cases, the regulator decided against market testing the concessions.

But Microsoft should still beware. The company won’t want to be the next outlier in that trend.

Shares in Microsoft trade on Nasdaq. Mountain View, California-based LinkedIn is listed on the New York Stock Exchange.

The commission’s case number is M.8124.