17 Comments

Summary:

According to multiple reports, Groupon has walked away from a rumored $6-billion acquisition offer from Google, and is choosing to go it alone, and possibly file for an initial public offering. The two-year-old company is said to have annual revenues of close to $2 billion.

5201718581_62d389855c_z

According to multiple reports late Friday, Groupon has walked away from a rumored $6-billion acquisition offer from Google, and is choosing to go it alone — and possibly file for an initial public offering next year. Rumors about a Google deal for the group-buying company have been swirling all week, with the price Google had offered reported initially at $2.5 billion and then as high as $6 billion. The collapse of the deal was first reported by a website associated with the Chicago Tribune, which quoted two sources with “direct knowledge of the situation,” and Groupon’s decision to walk away from the table was also confirmed by several other technology blogs through their own sources.

If it had closed at $6 billion, the deal would have been almost twice the size of the search company’s largest acquisition ever (the $3.1-billion purchase of DoubleClick in 2007), nearly four times the size of its second-biggest deal, the purchase of YouTube for $1.65 billion in 2006. There were many critics of the Groupon offer — some of whom argued that the two cultures were too dissimilar for Google to benefit from buying the company, and others who argued that Groupon was effectively just an email marketer, and wasn’t worth the huge multiples of revenue that Google was planning to pay.

Others, however, argued — as we did — that Groupon’s connection to local businesses and merchants, and its ability to pull those businesses online through the power of its group-buying discounts, would have made for a powerful marriage with Google’s vast web reach and its search algorithms. The web giant has tried repeatedly to reach local businesses through a variety of services, including its Google Place Pages and related Yelp-style recommendations, but has had little success. Some proponents of the deal believed that Groupon would have been able to give these efforts a gigantic boost.

According to the Chicago Tribune report, however, Groupon has decided that it is better off to stay independent, and focus on growing its business organically — a business that is reportedly going to pull in as much as $2 billion in revenue this year, and is still said to be growing rapidly. The magazine’s sources said that the company might consider an IPO, and would make that decision sometime next year. Before talk of the deal with Google began, Groupon was in talks with venture funds to raise another round of financing, after closing a round of $250 million earlier this year that valued it at $1.35 billion.

If Groupon did actually refuse Google’s offer, that puts it in fairly elite company — not every company would have the stomach to turn down $6 billion from one of the web’s premier players, especially since Groupon is less than two years old (although it’s possible this could be a negotiating tactic). One of the few companies that has turned down a multibillion-dollar acquisition offer and not lived to regret it is Facebook, which rebuffed advances from both Microsoft and Yahoo. Whether Groupon has enough growth left to reach that kind of status — or whether it can fetch enough of a premium in an IPO to make staying independent worthwhile — is the $6-billion-dollar question.

Related GigaOM Pro content (sub req’d):

Post and thumbnail photos courtesy of Flickr user Groupon

You’re subscribed! If you like, you can update your settings

  1. 2plus2equals5 Friday, December 3, 2010

    “If it had closed at $6 billion, the deal would have been almost twice the size of the search company’s largest acquisition ever (the $3.1-billion purchase of DoubleClick in 2007), more than four times the size of its second-biggest deal, the purchase of YouTube for $1.65 billion in 2006.”

    Thanks for doing the calculations for us… but $6 billion is not more than four times $1.65 billion.

    1. Thanks so much for pointing that out. We made the correction.

  2. With Groupon walking away from a $6 billion take-over bid, considering that it’s “less than two years old” as you mentioned, to pursue an IPO is either:

    1. they value so much their independence;
    2. they think they can get more money;
    3. they are making a bad move.

    True, it’s great to help people find deals and and save them money but, everybody knows, that everyone is in business to make money.

    With Google snobbed, there’s only a handful of companies to meet or exceed that bid: Facebook, Microsoft and Yahoo.

    Groupon can also be an appetizing acquisition for Visa, Mastercard and PayPal in a sense that wherever or whatever they buy, they still need to pay for it.

    But then again, you mentioned that could also be “a negotiating tactic”.

    Whatever their reasons are, I think they’re making a BIG mistake. Economy still have not fully recovered the recession and not a lot of companies have deep pockets and can afford $6 billion dollars.

    I say take the money, relax and start another company within a year or so and make more money. Repeat.

  3. Whatever their reasons are, I think they’re making a BIG mistake. Economy still have not fully recovered the recession and not a lot of companies have deep pockets and can afford $6 billion dollars.

    I say take the money, relax and start another company within a year or so and make more money. Repeat.

  4. Matthew,
    It’s no surprise that any merger or investment deal under consideration fell through.

    Any deal with google would be subject to lengthy review from the DoJ. Unlike Admob, about half of Groupon’s employees are in Europe, so the EU anti-trust folks would be involved as well.

    The outcome of both anti-trust reviews would be disapproval, with good reason. The primary expense of daily deal companies is advertising. Google would essentially give free advertising and boosted search ranking for Groupon’s deals snuffing out any competition. (They did exactly this with YouTube.) This is not in the interest of the consumer and certainly not in the interest of small local businesses.

    So either the two parties can part now, or be forced to part a year or so from now. The choice was obvious.

  5. BAD decision….

  6. Groupon does not worth that much. Groupon is easily to be cloned.
    No invention, no new tech, no patent, no promised fixed relationship, it’s fade.
    In another two years, it will decline.
    Local business partner with Groupon do not make money only gain ads opportunity.
    Because of “Local”, will your local restaurants want to give you half price all the time?

  7. 6 billion dollars is a ridiculous amount of money. I hope it works out for them

  8. Why Google Should Buy a Groupon Clone: Tech News « Tuesday, December 21, 2010

    [...] knows it has some holes to fill, and was prepared to spend a bundle to do so. Groupon chose to remain independent and continue to scale, which will probably require more funding on top of the $165 million or so it has already raised, [...]

  9. It’s Time to Get Your Vote On for the Crunchies Finalists : Tech News and Analysis « Friday, January 7, 2011

    [...] for Best Startup or Product. Oh, and Groupon is in there too, because you can’t turn down a rumored $6 billion offer from Google without getting noticed. So, in only two weeks we’ll gather at the Palace of Fine Arts in San [...]

  10. Page Is Back as CEO, But is That What Google Really Needs?: Tech News and Analysis « Thursday, January 20, 2011

    [...] build any substantial new businesses, despite a number of attempts, including its recently rebuffed $6-billion acquisition offer for Groupon. As angel investor Chris Dixon put it, some Google watchers are probably asking: is Page’s [...]

Comments have been disabled for this post