Not So Annus Horibilis, Britannica Locuta Causa Finita: Brief History of Great Britain from the Top PGDM College in Delhi NCR

The vast plethora of PGDM colleges in Delhi NCR must have had the shock of their lives! At Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR the academicians have in the lectures on economic environment of business chanted hymns in praise of financial globalization and the concept of economic integration but not so much as to overlook the stark realities of an inherently and historically fragile Europe. Yesterday’s round of epic voting has probably undone the ideas, hard work and peace collaborations of the United States of Europe. While it does not sound good from an Indian perspective and the ramifications of this watershed event shall be felt through ages and spaces in the world, it is worthwhile to assess the history of Great Britain and its ties with Europe through ages before coming to the final word of the impact.

The Pre-Human and Ancient History of Great Britain

Great Britain as a land mass and as a geographical entity came into existence as a result of the melting of glaciers during the times succeeding the Continental Drift. Around 6000 BCE, the British Isles were formed on the edges of the Atlantic Ocean. Human settlements followed. Yuval Noah Harari, the critically acclaimed Israeli historian and anthropologist has given a detailed account of the first species of human beings in Europe and particularly in Great Britain. In his book titled “How Did Humans Get Smart?” he writes of the earliest species of human beings and the ancestors of modern day people of European nationalities. It makes sense here to drift to physical anthropology for a while before reverting back to financial integration. Homo sapiens are just one of the many human species that have survived. Europe for that matter and Great Britain in particular was occupied by Homo Neanderthalensis. They were better known as the Neanderthals. Modern day physical anthropologists and scientists working on genome theory have substantiated the fact that Neanderthals, the original inhabitants of Europe do not have much of a linkage with the gene samples collected from modern day Europeans. It is also interesting to note that Homo Sapiens the smartest and the only surviving human species had originated in East Africa and then spread to different parts of the world to edge out competing human species like Homo Erectus in Asia, Homo Soloensis in South East Asia and the Neanderthals of Europe by means of a cognitive learning revolution and community building. There are two lessons to be learnt here. Homo sapiens from East Africa were smarter at organizing themselves as communities and better at processing knowledge. Community building which is a precursor to any kind of social institution formation like family, clan, caste, religion, nation or economic integration was and never has been the forte of the original inhabitants of Europe. In fact gene samples of modern day Europeans show that they have traces of mixed genetic heritage which further proves that globalization and integration in the purely biological and physical anthropological context has been going on since ages when people probably never imagined European idiosyncrasies like nationalism, globalization and economic integration. We had integrated as people sans the formation of Europe and sans the formation of European Union!

The Transition from Pre Human to CE Era of Great Britain

By 5000 BCE trade between Great Britain and Spain was well on its course and the coast of the Atlantic which was widely believed to be the edge of the world had become a channel for lateral communication in Europe but was the last strand standing between Europe and the Americas. In 55 BCE, when Julius Caesar attacked England, England was high linked to France in terms of politics, governance, economy and ethnicity. The Atlantic Ocean was too big a monster to be sized up for the creation of a flat world. By the last centuries of BC, France was integrated with England culturally, ethnically and economically although the identities of French and English nationalities were yet to be shaped. In the first centuries of CE, Rome governed England and Wales and linguistic evidences suggest the influence of Roman language on English. Also there are evidences that assert that it was the Romans who introduced Roman Catholic Christianity to Great Britain by replacing Paganism of the Iron Age era that was common among the Celts, Nordics and Scots. The Germans invaded England in 400 CE and then both the French and the Norsemen plundered England. By the time it was 1100 CE, English kings of mixed French Norse descent had relegated militarily and politically and by 1475, the English King Edward IV had renounced claims on France for cash for self-rule exchange.  

The Medieval Era in Great Britain: Weakness Became Strength

The medieval era is hard to demarcate. History and time offer no boundaries. Time as such is a continuous variable. What really sets the medieval era apart from the ancient era perhaps is the invention of large cargo ships? Cargo ships that could carry merchandise and people and hence offered the opening of Trans Atlantic communication and exchanges of ideas, merchandise and people gave way to the integration of Great Britain with the world through the English Channel. Spain and Portugal dominated in the early centuries of naval warfare, piracy and international trade. Yet Portuguese and Spanish rulers plundered their traders for cash, gold and spices that were traded. Mercantilism was in favour with the Spanish and Portuguese monarchs who went to great extents to extract the extra mileage from their traders. Great Britain and its monarchs on the other hand were weak. They were too weak to govern and rule with an iron fist and this gave English traders the opportunity to build a stable and scalable business empire based on political and economic liberalism. It makes sense here to assert that economic liberalism actually allowed Great Britain to become a melting pot and a confluence of business enterprises, communities and cultures. In 1688 the Glorious Revolution occurred and it brought monarchs of Dutch descent to power. By the time the eighteenth century started Great Britain was well on its path to power, progress and growth by leveraging peace and buying time to organize itself. By 1815 Great Britain had well shifted the balance of power and London had become a strong financial hub. The dominance of Great Britain was not premised on tax and plunder of gold from its citizens but through dominance in trade and colonization of different continents.

In the last 300 years Great Britain has kept Germany down, America alongside and Russia out of Europe. In the 17^th century Great Britain fought an all out war against Holland. In the 18^th century Great Britain fought the Hundred Year War against France. In the 19^th century Great Britain fought numerous small wars to colonize non-European nations. In the 20^th century Great Britain twice warded off challenges from Germany during the two World Wars. The First World War was won by paying a hefty price and the Second World War saw the coming together United States of America and the erstwhile Union of Soviet Socialist Republics. In the 21^st century Great Britain has filed for a divorce suite against Europe and is sandwiched among the BRICS nations. At Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR, we have said this before and say it now. Globalization is a process and not an ideology to pursue. It will happen as it should. But to say that the world is flat and that the European Union or any other union can sustain itself while traversing against the currents of globalization is incorrect. The BREXIT referendum is not a mandate against globalization. It is a part of the process that is always altering itself. The separation of Great Britain from the European Union is like Brownian movement of sub atomic particles. The end is yet to be in sight but as of now one must confess that European Union is a sinking ship and those who fear for their lives will jump off it, whether the on-boarders like it or not. Not so annus mirabilis!

The Microsoft Acquisition of LinkedIn: A Mid-Summer Night’s Dream or Love’s Labour Lost: Insights From Top PGDM College in Delhi NCR

The top PGDM college in Delhi NCR has spent some exciting times researching the data available on the acquisition of LinkedIn by Microsoft. It has been about a week that the news of Microsoft the leading professional cloud services enterprise, acquiring the world’s leading professional networking services enterprise has hit the markets and reactions have been tumbling from all quarters. At Ishan Institute of Management & Technology, the faculty members of the business school took some time to collect, analyze and interpret data and then reproduce it in capsule form such that the groundwork is done for a path breaking case study on what may be a path breaking acquisition for Microsoft. Yet, the mood that we have embraced is one of cautious optimism. There are many questions to be answered. We have tried answering all of them to the best of our capabilities. Read on for what makes to be a very fine case study for sure.

The Core Competencies of Microsoft & LinkedIn

Microsoft has announced that it has acquired LinkedIn for USD 196 per share in an all cash transaction that is valued at USD 26.2 billion. This figure includes the net cash balance of LinkedIn. Both Microsoft and LinkedIn are brothers in crime when it comes to sharing a common mission. Microsoft’s mission is to empower every person and every organization on the planet to achieve more. LinkedIn’s mission is to connect the world’s professionals to make them more productive and successful. LinkedIn has been a prime target for Microsoft all these years and the former had been eyeing to acquire the latter. What makes LinkedIn as attractive as an acquisition target? Here is the LinkedIn corporate profile in numbers.

Market Penetration of LinkedIn ·        200+countries and territories ·        433 million members ·        19% YoY growth in membership ·        105 million media access units (MAUs) ·        9% YoY growth in MAUs

Growing Engagement ·        60% traffic from mobile segment (49% YoY growth) ·        45 billion quarterly page reviews (34% YoY growth) ·        7 million active job listings (101% YoY growth)

Top line & Bottom Line Results ·        3billion USD revenue (35% YoY growth) ·        2 billion USD talent solutions revenue (41% YoY growth) ·        7 million active job listings (101% YoY growth)

Both Microsoft and LinkedIn work with the market for professional solutions at their respective levels. Here is a look at their individual professional solution offerings.

Microsoft ·        1.2 billion plus Office users ·        300 million plus Windows users ·        70 million plus Office 365MAUs ·        8 million plus Dynamic seats ·        5million plus Azure cloud organizations

LinkedIn ·        433 million users ·        105 million MAUs ·        7 million active job listings ·        9 million company pages ·        50,000 active university pages ·        2 million paid subscribers

Microsoft ·        Email ·        Calendar ·        Documents ·        Messages ·        Contacts ·        Collaboration ·        Meetings ·        Customer Accounts Expertise

LinkedIn ·        Recruiting and Hiring Managers ·        Prospects ·        Jobs ·        Universities ·        Learning ·        Insights ·        Co-workers

The Combined Scenario: The Synergistic Effects of the Acquisition 

Microsoft and LinkedIn both have their unique core competencies as shown above. Both these enterprises are technology based operators and serve the professional segment. In a world where data analytics, social selling and social CRM are becoming the buzzwords, the synergies of the acquisition can significantly alter the way business is done. There is no doubt that the effect on business development is going to be the most telling. The business process maps of marketing function of man organizations can now be streamlined to make decision making even more data centric, assess potential prospects, observe and monitor leads, execute follow up exercises, harness data from social media analytics and put forward a simple centralized pathway to market that is less time consuming and less cluttered. Post the acquisition professionals working in corporate sector, government offices and even in start-ups can look forward to the synchronization of Microsoft 365 apps like email, calendar, collaboration, social intranet, instant messaging, Cortana,Windows, MS Office suite, Skype, Outlook and LinkedIn account. The combined product menu represents the classical hub spoke model where all Microsoft apps can be delivered on demand by tying them to one unique LinkedIn account.

LinkedIn=Windows+ Microsoft Dynamic CRM + Outlook + SharePoint+ Skype+ Yammer + Bing + Office 365 + Cortana

 The User Experience of Microsoft & LinkedIn Combined

This acquisition promises to revolutionize the way marketing and business development is executed. In the near future, business development people may look forward to getting help from Cortana, the digital personal assistant on getting suggestions on professional networking for lead generation by processing insights and information on meetings, collaborations, projects and industry buzz. This shall streamline communication routes between clients and solutions providers and enable the identification and development of opinion leaders, gatekeepers and influencers in business development. Moreover imagine the amplification of the powers of Microsoft CRM Dynamics, once the CRM software app of Microsoft is directly linked through an API to the LinkedIn sales navigator. It shall transform the sales cycle and enable each seller to get real time updates on prospects and clients to achieve faster time to market and higher revenues. Leaders in organizations can have better access to business intelligence knowing where and when their team members collaborate with people inside and outside the organization and thus execute manpower requirement planning accordingly while motivating existing staff to reduce wastage of efforts, time and relationship building in the unproductive areas. The marriage of convenience shall also enable design thinking and development of just in time learning through social media. Staff members can have seamless access to online learning options on LinkedIn and control the same from a single account.

Acquisition Finance, Capital Structure Challenges and Corporate Governance

The deal no doubt looks so good and interesting. Yet, at the beginning of the case study we had mentioned that at Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR we are embracing a mood of cautious optimism. We spill the beans here.

There are some astounding elements in this case study. The way in which Microsoft has gone about financing the deal should raise a few eyebrows. Why would a corporation that has more than 100 billion USD in cash lying idle in bank accounts wish to opt for debt capital and thus upset the debt to equity ratio in its capital structure? Is the deal overpriced at 196 USD per share? This is particularly the case because the India born CEO of Microsoft, Mr.Satya Nadella is very well aware of the consequences of putting his company down in debt. One of the obvious consequences of the debt capital financing of the deal may be a possible downgrading by credit rating agencies like Moody’s that is bound to have an adverse impact on share prices, market capitalization and eventually earnings per share. There are plausible explanations though.

First, debt capital in the United States is tax deductible. The debt capital can save Microsoft of USD 9 millions in taxes. Second, corporate debt in the United States is 42 times cheaper than corporate equity and thus generates significant savings. This fad of financial engineering is not new to firms in the United States. Apple has resorted to such financial engineering in the recent past and used dividends and share buybacks to repay investors and boost share prices. This financial engineering of debt to share buybacks may though lead to another bubble burst and the United States government must take earnest steps to prevent another subprime crisis.

Coming to the part of corporate governance post the acquisition and a gloss over of the inorganic growth history of Microsoft, there are challenges to be confronted. There is news that Reid Hoffman shall continue as the Chairman of the LinkedIn board and that the CEO, Jeff Wiener shall continue post the acquisition. It has also been said that Microsoft and LinkedIn shall continue to retain their respective brands and corporate cultures post the acquisition. One wonders about the path to integrating the organizational structures and modes of operations of both the companies. More over Microsoft has not tasted blood in its recent big ticket acquisitions of big preys.

·       Microsoft acquired Skype in the year 2011 for USD 8.5 billion and Skype has not really worked out to the plans.

·        Microsoft acquired Nokia’s mobile phones division and that too was a dull whimper in terms of share holder value creation.

·        The deal is overvalued to an extent. At USD 196 per share of LinkedIn, Microsoft is paying 91 times the EBITDA over the last 12 months and 26 times the forward earning projections of EBITDA. Moreover LinkedIn makes a grand pay out in ESOP to its employees. LinkedIn lost USD 166 million on USD 2.99 billion in revenue in the year 2014.

At Ishan Institute of Management & Technology, one of the top PGDM colleges in Noida we aim to observe the developments closely as the deal unfolds over the year end. On a closing note a big complement to our very own India born Satya Nadella, the CEO of Microsoft on his first big ticket acquisition.