SMB Buyer Profile: Groupon

Each month we profile active buyers of SMB-focused startups. While we may know the buyers well, the information used in these posts only contain publicly available information.

This month, we are taking a look at Groupon as an acquirer. Check out our previous buyer profiles for Deluxe, GoDaddy, Sage and Intuit.

Groupon pegs itself as the “proven pay-for-performance SMB advertising platform.” At one point, Groupon was in over 500 markets in 48 different countries. Since then, it has scaled back, selling off operations in Malaysia, Russia and Indonesia, as well as closing its operations in 11 other countries. Groupon is currently focused on scaling in North America, and on getting their developing markets to profitability.

Groupon launched in 2008, and went public in Q4 2010. Groupon has been an active buyer, with over 62 acquisitions and investments over its short lifetime of 8 years.

In the early stages after its IPO, Groupon was spending a lot of money to consolidate the market, which at that point was extremely fragmented with over 500 competitors in the group buying market. Groupon’s acquisitive appetite has waned in the past few years. This is congruent with their renewed focus on the North American market, to ‘reduce empty calories’ and to streamline the business.

Here is a look at their acquisitions by segment:

From Groupon’s past acquisitions, it’s clear that most, if not all, of its purchases have been on strategy (at least at the time of purchase). In the first year of acquisitions, Groupon scooped up 5 deals websites. In recent years, Groupon has focused its efforts on acquiring marketing tech firms, reservation firms and social networks in order to improve its product offering and user penetration.

Here is the breakdown of acquisitions by size:

Groupon is not particularly forthcoming with details on its purchases, and about three-quarters of its deals do not disclose purchase price. In its purchase of LivingSocial earlier this year, the company disclosed the acquisition as “non-material.” At one point, LivingSocial was valued at $6B USD. However, the company stressed in its Q3 earnings report that it aims to maintain its balance sheet strength and financial flexibility — shutting down the expectation for large buy-outs of another company in the near term.

Here is the breakdown of acquisitions by geography:

Unsurprisingly, the majority of Groupon’s acquisitions have been in the US. Out of the 9 deals websites that Groupon acquired, 6 of them are international while only 3 are based in the US. All of these international acquisitions were made between 2010 to 2011 during the time of mass consolidation. Out of the last 20 acquisitions that Groupon has made, only 2 were international (Canada and Spain). This demonstrates a lack of appetite for Groupon to again start its international buying spree.

Here are the acquisitions by funding status:

The mass majority of companies acquired by Groupon have had venture backing at one point or another.

Largest acquisitions with disclosed values:

Only 11 of the 42 acquisitions have disclosed values. LivingSocial, which Groupon announced it was acquiring in October, was valued at $6B as it raised its Series F in 2011. In its last round in 2014, it was valued at $1.5B. While Groupon likely got a great deal on the purchase, it is likely that the purchase value would have put it up on the list of largest acquisitions to date.

Most Recent Acquisitions:

Out of the last five purchases, only the OrderUp acquisition disclosed its purchase price. Groupon scooped up the company for $89M USD. The most recent acquisitions are focused on enhancing Groupon’s product offering away from just deal of the day companies.

Looking Forward…

Groupon continues to focus its efforts on North America and enhancing its profitability and building adjacent verticals away from deal-of-the-day websites. As it continues to focus on increasing frequency of purchases for each customer in order to increase ARPU, it’s likely that purchases in the future will be focused on consumer basics or subscriptions. In addition, the company is investing in improving its customer experience. This also opens up the possibility of acquisitions in the marketing tech space to allow for better customer journeys.

However, with Groupon selling off 6 of its subsidiaries in the past year (of 8 total divestitures in its lifetime), it’s unlikely Groupon will be making any large purchases anytime soon. As well, with most of its divestitures being international facing, Groupon is not likely to make cross-border purchases unless there is a strong strategic fit.

At SurePath Capital Partners we help startups raise the capital needed to become market leaders. When the time is right, we help our clients achieve profitable, deliberate exit strategies. We only work with startups in the SaaS, e-commerce and marketplace segments. Across those segments we have a deep focus on companies serving the global SMB market. Say