06 December 2010

Groupon Says No to USD 6 Billion...

I am not sure that many people would have the testicular fortitude to say "no" to Google and USD 6 billion. However, the founder of Groupon, Andrew Mason, has apparently done just that. Groupon is an online coupon site that has reportedly reached a very impressive 35 million users. Simply, that many daily users is going to be of interest to Google as it looks to crush its competitors and to beat its way into more spaces in the online world.

Mason has allegedly turned down Google's offer because he was not comfortable with what was going to happen to Groupon post-acquisition, particularly the direction that the company would take and what would happen to Groupon people. So, rather than take the plunge, Mason told Google to go away. This is probably not the end of the deal, but it would seem that Mason is now holding all the cards, or at least the best hand by some way.

Google and, the CEO, Eric Schmidt are going to have to part with a little bit more of the reportedly USD 33.4 billion in cash that they have on hand for acquisitions. It would also seem reasonable to suggest that Mason requires a few other assurances from Google if this deal is to be re-started and concluded. This is a distinct possibility because the numbers game so far suggests that Google was prepared to go all out to get Groupon. The USD 6 billion offer, combined with the supposed incentives factored into the deal, meant that the Groupon acquisition was set to double the previously Google record for an acquisition of USD 3.2 billion for DoubleClick.

Nevertheless, the cards will not remain in Groupon's favour forever as other imitators will undoubtedly rise from the internet coupon dust. Google may opt to throw cash at a coupon start-up if it cannot convince Groupon to sign off on the acquisition. Yet, even Google must realise that Groupon is the best alternative with respect to immediate growth potential. A start-up is always a much more risky proposition, particularly when Groupon is reporting that with projected growth this year it is expecting sales of some USD 500 million.

This might be one worth watching as it Groupon seems like it is willing to go the IPO route if an acquisition is not finalised. However, even if an acquisition is finalised, it is not a done deal because there are plenty of concerns about whether this deal would be bad for consumers. US regulators are sure to run the critical eye over the deal.

I am wondering whether I would have had the testicular fortitude to say no to USD 6 billion. Then again, I would not know how to start spending it once I had it. There are only so many things once can conceivably buy and enjoy, right?

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