Why the Groupon and Google deal fell through

Fri, Dec 24, 2010


Earlier this month, reports surfaced that Google was interested in acquiring Groupon for a monstrous $6 billion. News of the proposed purchase expectedly set off a firestorm of public scrutiny and bewilderment. On one hand you had folks arguing that Google, regardless of how much cash they have in the bank, was making a big mistake if they thought they could seamlessly incorporate Groupon into their stable and actually recoup their excessive investment. Then you had folks exclaiming that Groupon would be utterly moronic not to sell for such a high price.

But in the end, a deal was never reached and Google and Groupon both moved along in their merry, albeit separate, ways.

It was never quite clear, though, why the two companies were unable to come to terms, but business analyst Paul Kedrosky has in interesting take that makes a whole lot of sense.

From an interview with Ad Age:

Ad Age: On the heels of that question and recent events, what should Groupon do?

Mr. Kedrosky: Sell sell sell!!! The actual problem with the transaction came down to the break fee. Groupon got very worried that this deal would fall apart due to anti-trust regulations (Google has had problems with this before). Groupon wanted to sell, but in case the deal fell apart, they wanted to get paid anyway, and that’s the purpose of a break fee. At the end of the day, since Google couldn’t come up with a a large enough break fee, it means there was a real likelihood that the deal could have fallen apart and they had something to worry about.

Ah, that pesky break fee. Must have been significantly less than $6 billion 😉



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