Shares in the company, which floated in May 2011, have fallen by more than 40% this year.
Microsoft said that LinkedIn would retain its "distinct brand, culture and independence".
Martin Garner, Senior Vice President, Internet, CCS Insight, commented, “This move gives Microsoft access to the world’s biggest professional social network at present - a worldwide platform with a position that Microsoft could not have built itself. It also brings the opportunity for deep integration with a large number of Microsoft assets.
“The justification for an acquisition on this scale has a lot to do with Microsoft’s vision of digitalized businesses running on collaborative and social tools, including its recently articulated Conversation-as-a-Platform. Several key players have a broadly similar vision and it is likely that other players were competing to acquire LinkedIn.
“LinkedIn provides a potential platform for collaborative sharing given its “social network” characteristics, enabling Microsoft to compete more effectively against other challenger services such as Facebook-at-Work and Slack. LinkedIn has several assets in this area including the timeline it offers to users, in-built messaging and tools such as slideshare.
“There are many opportunities for integrating Microsoft services with LinkedIn including Office 365, Exchange, Outlook, skype, CRM (Dynamics) to challenge Salesforce.com more successfully, its enterprise messaging service Yammer, its newer graph services such as Delve, as well as its cloud computing services. It is also a fantastic resource for Microsoft’s artificial intelligence efforts providing a huge amount of data mining opportunities. However it will be a substantial integration challenge to do this quickly and extract maximum value from it.”
The takeover is the biggest acquisition made by Microsoft, which paid $8.5bn for Skype in 2011 and also bought Nokia's mobile phone business for $7.2bn in 2013. The LinkedIn acquisition also eclipses the $19bn that Facebook paid for WhatsApp in 2014.
Despite having a cash pile of about $92bn, Microsoft said it would pay for LinkedIn mostly by issuing new debt.