Group-on's Rejection of Google: A Trend Not An Aberration

There was much surprise when on-line discount marketer Group-On rejected Google's seemingly rich offer last month. As Jay Chatzkel's article makes clear in his Beyond the Deal newsletter (based on James Altucher's interview with analyst Henry Blodget), Group-On's decision to go it alone was a smart strategic decision - and consistent with current dynamics.

The refreshing thing that this conversation reveals is that there is a broader dynamic at work here. This is not just the case of one company seeking to acquirer another and being thwarted. Rather, what is taking places is the emergence of a whole new group of companies that are moving their field, and in this case the Internet, to a next level. The move for acquisitions takes on a new and different meaning here. There must be much more than the usual incentives to entice the owners of these new generation companies to sell out at a time they are seeing that "they" are the future. The question then becomes, "What could a company like Google do and how could it relate to these new generation firms so that they could leverage each other for a greater outcome than either could achieve themselves."

Consider James Altucher's (jamesaltucher.com) comments in a interview with Henry Bloget, Editor in Chief of The Business Insider (http://finance.yahoo.com/tech-ticker/groupon's-rejection-of-google-marks-a-new-and-improved-internet-bubble-says-james-altucher-535706.html?tickers=goog,yhoo,^ixic,qqqq,xlk):



According to Altucher:


"It's not only Groupon. Everybody has rejected Google: Facebook, Yelp, Twitter, maybe Foursquare, maybe LinkedIn, etc.

"All of these companies are fast growing, earnings positive companies. It is not just a bubble. This is a real boom. They are saying, "No" to Google not because Google's cash or stock are no good. They will make more money than if they took Google's stock.

"These companies are going to be worth hundreds of millions of dollars. The investors and employees are going to recycle that money into the next generation of Internet companies. These companies are growing 15-20% a year. They should be worth $15-20 billion or more. The owners know that. The owner of Groupon is worth $100 million. Why would he want to be an employee of Eric Schmidt when he could go on to make $3-4 billion out of this?



"All of these companies are going to go "public", meaning that Google won't be the only acquirer. Groupon and others (Facebook, Twitter, LinkedIn, etc.) will also be active acquirers."

To confirm Altucher's point, the financial news service, Dealbook, reports that Groupon Inc. is pushing forward with its plan to take the company public, at an estimated $15 billion or more."


This is another dimension of the "new normal". It is not just the "Crash of 2007" but also the emergence of a whole new cluster of companies that are creating value that did not exist in exactly this way before. These new companies and new futures need to be appreciated for what they are. For those involved with growing organizations through strategic acquisitions, this is a departure point for rethinking what an acquisition is and what it could mean.

For one thing it means that the company that is seeking the acquisition must present at least as good an opportunity for the target firm as the one it could create on its own. The acquirer must also offer a compatible culture, provide a high degree of recognition, and serve as a vehicle for the target to achieve its goals. In a sense the acquisition equation is being reversed here. The acquirer must demonstrate that it is worth considering, rather than the other way around. Partnering between the acquirer and the target moves to a whole new level of equity here. Once this is understood, the choice to acquirer becomes much clearer. The acquirer must demonstrate that it has the set of capabilities that will lead to mutual success for all parties