The Real Reason Groupon Rejected Google’s $6B (Wait for It)

Minds are still boggled and mouths agape at the unfathomable fact that Groupon turned down Google’s $6 billion deal earlier this month. The Chicago based company has been called everything from crazy to some not-fit-for-print expletives centered on the idea that the coupon giant was so unbelievably greedy and just holding out for more cash.

And $6 billion is one big boat load of cash, one that most of us would have been happy with a fraction of a fraction of (depending on what fraction you’re using of course). Early on John Shinal from Fins Technology speculated on the deal going through:

Provided they received compensation packages typical of most startups backed by venture capital investors, the earliest Groupon employees will likely see a payout worth tens of millions of dollars.

Assuming founder and chief executive Andrew Mason, 30, retained a typical level of equity as the company grew, venture capitalists and startup recruiters said he may own as much as 10% of Groupon. That would give him a payout of at least $530 million.

…some senior leaders hired early on at the director level likely are holding stock grants worth a quarter of a percentage point, or 0.25%, of Groupon’s equity. Even that fraction would be worth $15 million at a $6 billion sale price.

Brad Keywell and Eric Lefkofsky, Groupon cofounders, stood to make as much as $600 million and $1.8 billion, respectively.

Of Course we all know now that the deal didn’t go through and there were those that could not believe what they saw as Andrew Mason’s sheer stupidity or consummate greed. It all made for some heated conversations in forums and blogs across the internet.

To make matters worse, well respected writers and those that should have known better continued (and still continue) to perpetrate the idea of Groupon’s and CEO Andrew Mason’s folly and greed. Just this week a reporter from All Things Digital (why does the term “a grain of salt” come to mind here?) wrote an article titled One Man’s Opinion Why Groupon’s Andrew Mason Is as Bad a CEO as Mark Hurd. Mark Hurd was Chairman, Chief Executive Officer and President of HP who resigned back in August amid allegations of sexual harassment.

The article on All Things D went on to add:

Sydney Finkelstein, a business professor at Dartmouth, appeared on NPR last week to discuss “The Worst CEOs of 2010,” and Mason rose to the top, along with BP’s Tony Hayward and HP’s Mark Hurd, both of whom lost their jobs.

Now we all know (or should know) who Tony Howard is. He was CEO of BP when it caused the worst environmental disaster in U.S. history earlier this year. To compare Andrew Mason to either Hayward or Hurd would be absurd, if indeed that was what Professor Finkelstein did say but he never made such comparisons. He was only replying to the host when asked his opinion about Mason turning down the $6 billion offer from Google and what was wrong with it.

Professor Finkelstein’s answer was:

“Well, six billion reasons why that might not be the best thing to do. It’s, you know, we’re looking into the crystal ball. And I may very well be wrong, but I’ll tell you, based on my own research and working with many organizations, I think Andrew Mason looked at Mark Zuckerberg as his role model – the founder and CEO of Facebook. And Zuckerberg had many opportunities to sell his business, and he didn’t. And you can see how incredibly valuable that company’s become.”

The fact that the author from All Things D could or would fabricate such an article comparing Mason to Hayward or Hurd is nothing less than irresponsible.

So after all that, the question still remains. How Could Andrew Mason and the other powers that be at Groupon turn down what would have amounted to hundreds of millions in personal wealth for each of them? The answer has little to do with the amount of money that was on the table.

A few days after the deal fell through, a source close to Groupon said that it was ultimately antitrust concerns that forced Groupon to turn down Google’s offer. Those at Groupon believed that a merger with Google would draw more regulatory scrutiny than any of Google’s other deals had done and the possibility existed that it might not be allowed to go through.

Currently Google is dealing with two antitrust investigations, one in Germany and the other involving ITA Software. Google also underwent regulatory scrutiny when acquiring DoubleClick and AdMob and it was antitrust issues that ultimately prevented Google from taking over Yahoo search.

So in the end, due to the risks involved, Groupon turned down the offer and walked away. It wasn’t stupidity or greed or Andrew Mason’s incompetence as a CEO. It was simply a well thought out business decision and possibly one that may prove a wise decision by Groupon in the year ahead.

Source: npr