Contact: Scott Denne
Though the acquisition of lynda.com is far larger than any of LinkedIn’s other purchases, it’s picking up an asset that shouldn’t be a drag on its financial performance and one that plays in a market where the company is comfortable. At $1.5bn (which includes $720m in stock), the deal is more than 8x the size of its Bizo buy, its previously largest transaction at $175m. Bizo, by comparison, was a complex (though we think smart) acquisition that brought LinkedIn into the ad network business and involved a significant change to the target’s low-margin business model.
Both LinkedIn and lynda.com have about 70% gross margins, both spend 35% of revenue on sales and marketing, and lynda.com has EBITDA margins in the 5-10% range, just under LinkedIn, which has posted a smidge over 10% in each of the past two years. However, at 20% year over year, lynda.com’s growth is a bit behind LinkedIn’s 45%. At 10x trailing revenue – a full three turns below LinkedIn’s own valuation – the deal looks like a bargain.
With today’s move, LinkedIn is obviously seeking more than matching financial performance. With lynda.com, LinkedIn has an opportunity to boost that 20% growth by marketing educational videos and courses to relevant customers on its network, and it increases its presence in higher education (higher ed and government account for half of lynda.com’s business), which is an important segment for LinkedIn as it looks to snag future professionals at an early stage in their careers. Also, when it integrates lynda.com’s educational materials, LinkedIn will get a better view into what its users want to do, not just what they do today.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.