If for some reason the deal fails to materialize, LinkedIn will have to pay Microsoft a $725 million termination fee, according to Microsoft's SEC filing detailing the merger.
The $196 per share offer is a substantial hike on its closing price from Friday, $131.08. After the acquisition, LinkedIn will maintain its branding and product, and it will become a part of Microsoft's productivity and business processes segment. LinkedIn's CEO Jeff Weiner will report to Microsoft boss Satya Nadella.
For Microsoft, the deal will pave the way for the company to compete better against the likes of Salesforce.
Microsoft's business is currently solely focused on software but the acquisition of LinkedIn will allow Microsoft to have a far bigger reach in terms of social networking services and professional content.
The wider social network of LinkedIn will prove a boon for Microsoft as it will give the Redmond-based firm a sales channel to sell more of its products.
In a section called "Selling to Social Selling", Microsoft provided details about its plans to use LinkedIn's social graph as an integrated selling tool alongside its existing CRM products.
It added that users of Microsoft's Dynamics CRM and other systems will want to use LinkedIn's Sales Navigator "to transform the sales cycle with actionable insights" - essentially lots of background information about users that can help find leads, open conversations and close deals.