The Google - Groupon monster deal worth $6 billion has fallen apart as talks ended between the two companies without an agreement. The deals site, which is said to be making $2 billion a year - significantly more than estimated, will go at it alone and aims for an IPO.
The news of the talks breaking down was first reported by Chicago Breaking Business and then confirmed by various sources. The two companies were negotiating a possible acquisition and Google was prepared to offer as much as $6 billion for Groupon.
There is no clear reason for why the deal didn't go through, but Groupon is expected to reveal the talks and its future plans next week. There are plenty of reasons for Groupon to stay independent, though this comes with significant perils as well.
At $6 billion, $5.3 billion plus earnouts, it would have been Google's biggest acquisition to date. The company is one of the few that can pay this much for a startup, though a pairing with the deals site wasn't the most obvious.
Google has little to no experience in e-commerce. Groupon being bought by eBay or even Amazon, some of the few other companies able to pay this much, would have made more sense.
However, Groupon has been growing at a huge rate and it would have given Google a solid foothold in the local space. The site has developed a relationship with small businesses in the cities it operates with the help of the sales people it employs.
Groupon was estimated to be bringing in about $500 million per year, a massive figure for the two-year old company, but not enough to justify the $6 billion price tag.
New sources say that the figure may actually be a lot bigger. Groupon is said to be making $2 billion in 2010 alone. Half of this goes to the companies offering the deals, so its revenue is at about $1 billion. The company employs about 3,000 people already and is expanding aggressively, so it may actually be looking for more funding from investors.