No comment from either company on why Google‘s $5 billion bid from Groupon was rejected. The result is that commentators are filling the vacuum with speculation and hearsay.
What we know is:
- throughout the last week or so, the two companies held talks at the top level, involving Google CEO Eric Schmidt, and Google founders Sergey Brin and Larry Page, as well as David Lawee, who handles mergers and acquisitions
- Google’s interest in Groupon was to accelerate growth of its reach into the lucrative local business advertising market
- Google’s bid was reported to be in the $5-6 billion range – the biggest potential investment for Goolge to date
- Groupon with annual revenues believed to be somewhere over $500 million
- Groupon’s Board rejected Google’s bid, preferring to consider preparing for an IPO sometime in 2011
There are several precedents which Groupon executives may be following. Facebook, for example, is now worth over $40 billion (based on SharesPost Inc) within 5 years of turning down a $1 billion offer from Yahoo.
On the other hand, Yahoo refused a $47.5 billion bid from Microsoft in 2008, and has watched its valuation drop by over 50% to $21.3 billion since then.
The challenge for Groupon and its Board is to follow Facebook, and avoid the Yahoo experience.
