In the late 2000s, Groupon was flying high. Since launching in 2008, they expanded internationally and hired more than 3,000 employees. Inspired by its quick rise, many people launched copycat versions of Groupon. The company was predicted to have more than $300 million in revenue in 2010 and Forbes called Groupon the fastest growing company in history.

Seeing its success, Google attempted to acquire Groupon for a whopping $6 billion in 2010. It seemed to be the perfect match. Groupon would be thrust into the spotlight and Google would be able to access the information of millions of Groupon consumers. Shockingly, Groupon’s board members refused Google’s bid.

There were a couple of reasons Groupon decided to walk away. Although Google’s bid was for $6 billion, 40% of that amount would have been paid over time, contingent on the company hitting predetermined revenue targets. Reportedly, Groupon’s board members were confident that they could meet these targets but it seemed the risk was too high. Secondly, because Groupon operates in a market with no barriers to entry, there was fear that an acquisition would result in an antitrust investigation which could last for more than a year. If the deal got delayed, competitors could gain more market share and Groupon may have had trouble meeting the revenue targets. Ultimately, Groupon decided to walk away.

What actions could have been taken by Groupon to save the deal? Groupon could have negotiated for a strong Material Adverse Change (MAC) clause. These clauses are written into deals as a way to protect companies in case the company starts to lose revenue or isn’t able to replicate the success it once had. Groupon could have also negotiated the total deal amount vs. earn-outs percentage. They could have tried to reduce the total offer of $6 billion in return for a smaller percentage of the “earn out” amount. They also could have tried to reduce the amount of money they would receive if they hit the predetermined revenue targets.

What actions could have been taken by Google to save the deal? Google was very keen on acquiring Groupon. They initially offered $2.5 billion, before upping the amount to $6 billion. However, Google’s offer did not take into consideration Groupon’s other values, signaling. Google’s offer sent the signal that they did not care about Groupon’s strategy and employees. Google was so focused on the money that it may have turnedput off Groupon’s management and board. Also, by offering such a large amount, Google reinforced Groupon’s confidence that it could keep growing. Once Groupon saw the offer, which was made only two years after launch, they thoughtrealized that they could grow the company even more than Google’s offer. In negotiations, instead of just focusing on the money, Google should have spent more time to think about Groupon’s strategy and employees, among other things.

All in all, this attempted acquisition highlights how important negotiations are. There may have been a path to a win-win deal.

After the deal was called off, Groupon went public. At first, everything was a success. Groupon ended its first trading day at a $16.6 billion value and it was the largest initial public offering since Google itself. However, in less than two weeks, shares tumbled. Ten years later in 2020, Groupon had a reverse stock split, combining twenty shares into one. In March of 2020, the stock was trading at less than a dollar. It rebounded to $31.40 a share in December 2020.

If there was better negotiation between Google and Groupon, Google’s acquisition may have gone through and Groupon would not be in the position it is today.

This blog post was written by Stepan Kouchakdijan.

In the late 2000s, Groupon was flying high. Since launching in 2008, they expanded internationally and hired more than 3,000 employees. Inspired by its quick rise, many people launched copycat versions of Groupon. The company was predicted to have more than $300 million in revenue in 2010 and Forbes called Groupon the fastest growing company in history.

Seeing its success, Google attempted to acquire Groupon for a whopping $6 billion in 2010. It seemed to be the perfect match. Groupon would be thrust into the spotlight and Google would be able to access the information of millions of Groupon consumers. Shockingly, Groupon’s board members refused Google’s bid.

There were a couple of reasons Groupon decided to walk away. Although Google’s bid was for $6 billion, 40% of that amount would have been paid over time, contingent on the company hitting predetermined revenue targets. Reportedly, Groupon’s board members were confident that they could meet these targets but it seemed the risk was too high. Secondly, because Groupon operates in a market with no barriers to entry, there was fear that an acquisition would result in an antitrust investigation which could last for more than a year. If the deal got delayed, competitors could gain more market share and Groupon may have had trouble meeting the revenue targets. Ultimately, Groupon decided to walk away.

What actions could have been taken by Groupon to save the deal? Groupon could have negotiated for a strong Material Adverse Change (MAC) clause. These clauses are written into deals as a way to protect companies in case the company starts to lose revenue or isn’t able to replicate the success it once had. Groupon could have also negotiated the total deal amount vs. earn-outs percentage. They could have tried to reduce the total offer of $6 billion in return for a smaller percentage of the “earn out” amount. They also could have tried to reduce the amount of money they would receive if they hit the predetermined revenue targets.

What actions could have been taken by Google to save the deal? Google was very keen on acquiring Groupon. They initially offered $2.5 billion, before upping the amount to $6 billion. However, Google’s offer did not take into consideration Groupon’s other values, signaling. Google’s offer sent the signal that they did not care about Groupon’s strategy and employees. Google was so focused on the money that it may have turnedput off Groupon’s management and board. Also, by offering such a large amount, Google reinforced Groupon’s confidence that it could keep growing. Once Groupon saw the offer, which was made only two years after launch, they thoughtrealized that they could grow the company even more than Google’s offer. In negotiations, instead of just focusing on the money, Google should have spent more time to think about Groupon’s strategy and employees, among other things.

All in all, this attempted acquisition highlights how important negotiations are. There may have been a path to a win-win deal.

After the deal was called off, Groupon went public. At first, everything was a success. Groupon ended its first trading day at a $16.6 billion value and it was the largest initial public offering since Google itself. However, in less than two weeks, shares tumbled. Ten years later in 2020, Groupon had a reverse stock split, combining twenty shares into one. In March of 2020, the stock was trading at less than a dollar. It rebounded to $31.40 a share in December 2020.

If there was better negotiation between Google and Groupon, Google’s acquisition may have gone through and Groupon would not be in the position it is today.

This blog post was written by Stepan Kouchakdijan.

Google's attempted acquisition of Groupon teaches us the importance of negotiations.

Google’s Attempted Acquisition of Groupon Highlights the Importance of Negotiation

Sat Mar 06 2021

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