Tuesday, November 30, 2010

Groupon - From Startup in 2008 to Potential $5-$6B Buyout by Google in 2010

While the opportunities are perhaps less than they were 25-35 years ago, there still is an ability for nearly overnight manic wealth in the country.  Groupon, founded in 2008, is rumored to be the next takeover by Google (GOOG) for the cool price of $5-$6B.  Talk about 'jackpot'.

You'd think Google could build a similar structure over the next 18 months for a fraction of the cost, but I guess they believe in first mover advantage.  The valuation seems insane - for a reported $345M in revenue, this price would be roughly 15x sales at the low end of the rumored bid.  But in a world of cheap money and the ability to issue a stream of stock certificates to pay for it, I guess valuation is relative - right AOL Time Warner?  (to be fair, in this specific case Google is sitting on a mountain of cash...north of $30B)

Via NYT:

  • Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter told DealBook on Monday. A deal, in the $5 billion to $6 billion range, could be struck as soon as this week, these people said, cautioning that the talks still could fall apart.
  • Since its founding in 2008 by Andrew Mason, Groupon has been growing at a nearly unprecedented pace. The company, whose name is a combination of “group” and “coupon,” specializes in providing customers with discounts purchased in bulk. Subscribers receive notifications of one deal a day, tailored to their location and profile.
  • The average Groupon deal offers between 50 percent to 90 percent off retail goods and services, from restaurant certificates to sky diving lessons. It has grown beyond local merchants to encompass national retailers like the Gap, which offered a nationwide deal this summer. (On the day of the Gap promotion, Groupon sold 440,000 units and generated $11 million in revenue.)
  • Groupon’s success has helped turn the company into a cash-generating machine, signing up more than 12 million registered users and reaping more than $350 million in estimated annual revenue.
  • Over recent weeks, Groupon has been the subject of scores of takeover rumors. Both Google and Yahoo were among the company’s top suitors, according to the people briefed on the matter, with the latter prepared to pay about $2 billion. But Groupon’s founders rejected the approach as too low.
  • As Yahoo’s approach sputtered, Google made an initial bid of $3 billion to $4 billion, these people said. But in the face of Groupon’s resistance, Google raised its offer to between $5 billion and $6 billion. The company is unlikely to offer more than that, according to one of the people with knowledge of the deal.

No position


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