Groupon Rejects Google's $6bn Takeover Offer

Groupon has walked away from Google’s $6 billion takeover offer.  The rejection at least temporarily thwarts Google’s efforts to buy the social buying site, which would have been its largest acquisition to date. According to several people with knowledge of the takeover talks but who were not authorized to speak publicly on the matter, Google was eager to purchase the fast-growing start-up, based in Chicago, raising its bid at least once during negotiations.

Options for Groupon include the possibility of staying independent but securing a significant investment, as its rival LivingSocial did by accepting $175 million from Amazon this week. Groupon’s chief executive and founder, Andrew Mason, has also expressed his interest in taking the company public with a share offering.

Groupon’s subscriber network has expanded to 35 million users in 300 markets in North America, Latin America and Europe. It is pulling in more than $1 billion in annual revenue. It is that high-octane growth that most likely stands in the way of a deal. During discussions, estimates of Groupon’s revenue continued to rapidly climb, weakening the value of Google’s offer. So, instead  Google may acquire one of Groupon’s larger competitors, such as LivingSocial, BuyWithMe or Tippr.

The dissolution is reminiscent of Google’s attempt late last year to purchase Yelp, the Web site that lists reviews of local businesses. Google walked away from that deal for reasons that were never explained. The offer for that proposed acquisition was said to have been around $500 million.

If completed at the offered price, the Groupon deal would top Google’s $3.1 billion purchase of DoubleClick in 2007. The acquisition also would have yielded an immediate lucrative payout for the company’s 30-year-old founder and its roster of financiers, which includes Accel Partners, Digital Sky Technologies and New Enterprise Associates, who have invested more than $170 million in the company to date.

Google had set its sights on the hyperlocal market for neighborhood mom-and-pop shops, where it sees a largely untapped group of business customers and advertisers. Groupon, which offers discount coupons, could provide Google with specific insight into consumer spending habits as well as provide access to a large fleet of salespeople with intimate knowledge of local markets.

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