If Google Buys Groupon, It'd Be a Windfall for Investors, Bankers…and Regulators?
If Google does manage to close the deal to buy Groupon–acquisition discussions flagged by BoomTown 10 days ago–it will be at a cost that is likely to be much more than the $2.5 billion price tag being floated in the latest batch of rumors.
It’s not just that the deal will likely come in at a higher number–upwards of $3 billion, according to sources I have spoken to–which will mean a big payoff for Silicon Valley’s Accel Partners, Boston’s Battery Ventures and Russia’s DST Global.
Or that this deal will net New York bankers used on each side–Allen & Co. for Groupon and Morgan Stanley for Google–sizable fees.
It’s because as soon as it purchases the social group buying phenom, the search giant will be buying a whole lot of pricey regulatory scrutiny too.
That cost will be, many think, much deserved and will definitely not come at any discount, given the rising worries in Washington about the swaggering power of Google.
After ever-testier brushes with federal regulators–including over an overreaching attempt to join with Yahoo in search and online access to copyrighted books–Google narrowly missed getting approval for its $750 million purchase of mobile advertising start-up AdMob.
That deal was only saved after Apple made enough noise in the same space to take the focus off the controversy.
And let’s not forget Google suing the feds earlier this month over being excluded from competitive bidding to provide email and collaboration technology to the Interior Department’s 88,000 employees.
More seriously, Google has come under fire recently from numerous critics for its proposed purchase of huge flight data firm ITA Software for $700 million.
Those opposed to the acquisition, on antitrust grounds, contend that Google would control travel search in a way that would inevitably invite abuse.
The government, of course, is looking over the whole deal now.
Having Groupon in its arsenal would garner Google even more powerful pricing information from both customers and merchants across the globe.
That would in the lucrative local commerce arena. Currently, despite a plethora of clones, Groupon dominates socially fueled couponing across cities worldwide.
Owning the hot space around local purchasing and consumer information, combined with the social element, would be a tasty treat for Google.
The Silicon Valley search giant has struggled to deliver social tools to users, even as Facebook has morphed into a potent rival.
Google had looked at social reviews site Yelp for purchase previously, but that deal fell apart.
It has been introducing its own various local advertising and commerce efforts, which would be instantly turbocharged given Groupon’s much quicker progress.
In April, Groupon garnered a valuation of well above $1 billion in a massive venture funding.
It has used that money to buy up companies in the U.S. and internationally, trying to solidify itself as the major player in the marketplace.
If Google were to complete a deal to buy Groupon, it would have echoes of its purchase of YouTube in 2006 for $1.6 billion.
Many felt it a high price at the time, but it looks cheap now given how the site almost completely dominates Web video.
If that deal were to be struck today, of course, it is unlikely regulators would allow such a purchase to sail through the approval process so easily.
Thus, it will be interesting to see how they will react to a possible hook-up with Groupon, which–in many ways–is perhaps the most aggressive of Google’s moves to date to own valuable data up and down the food chain.
And, like I said, this particular move to buy discounting online could be one of its costliest too, in more ways than one.
Please see this disclosure related to me and Google.