Alvin Koo's Blog

Following up on the case of Google’s planned acquisition of Groupon; the results of the negotiations have recently been out. Groupon has turned down Google’s $6 billion offer, in consideration of its own plans to go public next year.

The lecture on brand valuation and goodwill becomes relevant in this context, particularly in the perspectives of the two different parties of the negotiation. Although Google saw $6 billion as a very generous offer, Groupon saw a prospect much greater in the future if they remain autonomous rather than to receive the short-term gain that Google offered. The goodwill of Groupon highly-marked up based on the company’s 35 million users at present, offers great confidence that Groupon will grow to exceed $6billion in the future.

Despite Groupon’s aggressiveness over its valuation, they seem to neglect that there are many competitors out there that could bring down their valuation. Their choice to operate by themselves may be more risky than acquisition.

In conclusion I have come to realize goodwill valuations can be extremely subjective. This may introduce risk to both parties as subjectivity often neglects certain aspects of reality. Only end results will show the reliability of Groupon’s goodwill-based forecasts.

http://www.bloomberg.com/news/2010-12-04/google-bid-to-buy-groupon-site-is-said-to-be-rejected-update1-.html