The transaction is Microsoft's biggest ever purchase, having bought Nokia for $7.6 billion in 2013 and Skype for $8.5 billion in 2011, and is easily its biggest new step into the market of social media.
Founded in 2002, LinkedIn has grown into the largest professional social network, with 105 million active monthly users and more than 433 million accounts.
The transaction is predicted to be finalised by the end of the year, but LinkedIn will continue to operate independently with its own brand after the official acquisition.
Microsoft CEO Satya Nadella commented: "This combination will make it possible for new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and Office suggesting an expert to connect with via LinkedIn to help with a task you’re trying to complete. As these experiences become more intelligent, the LinkedIn and Office 365 engagement will grow.
"The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals. Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organisation on the planet."
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