Behind Groupon’s $6 Billion Brushoff of Google

From The Wall Street Journal:

dapted from “Groupon’s Biggest Deal Ever,” by Frank Sennett, to be published by St. Martin’s Press on June 5. ©2012 by Frank Sennett.

If you believe the rumored numbers, it would have been the biggest acquisition in Internet history—and you definitely should believe the numbers. In the fall of 2010, search giant Google GOOG -1.70% offered nearly $6 billion to buy Groupon, GRPN -8.93% the daily-deals site that became the quickest firm to rack up $1 billion in sales and the second-quickest, behind video behemoth YouTube, to hit a $1 billion valuation.

Online acquisitions didn’t get any bigger than this.

Andrew Mason, the inexperienced CEO hiding a brilliant analytical mind behind a goofball demeanor, turned 30 on Oct. 22 in the midst of dismissing interest from Yahoo YHOO -2.10% . A few weeks later, Google came calling.

Groupon was starting to enter a period of hyper-growth, increasing pressure on Google to raise its bid, which at that point had reached $3 billion. But the prospect of a sale was tantalizing to both Groupon’s leadership and its venture-capital investors.

On Nov. 22, Groupon chairman and co-founder Eric Lefkofsky told then-COO Rob Solomon to grab some clean underwear: They were going to California to salvage the deal. They left with that afternoon in a chartered jet from Chicago’s Midway Airport to San Jose.

Mason at that point was seven years out of Northwestern University, where he had majored in music. At six-foot-four, he struck some in Silicon Valley as a taller, more cherubic version of the comedian Dane Cook. When Mason wasn’t intensely focused on solving a business problem, he could disarm even the harshest critic with a warmhearted grin that crinkled his eyelids.

He was highly guarded about his personal life and emotions, which sometimes made him come across as cold to those who reported to him. But Mason was always willing to make himself physically vulnerable for the sake of a comedy bit, such as cultivating bizarre sideburns and performing a boot-scooting boogie as the cowboy-hatted pitchman for a monkey-rental service Groupon rolled out one April Fools’ Day.

Rumpled clothing and unkempt hair gave him a perennial Sunday-morning-in-the-dorm vibe. In fact, he briefly experimented with sleeping in his clothes so he could wake up a bit later in the morning. And he was so committed to defying the business world’s superficial rules of behavior and appearance that he once showed up to lunch with a billionaire decked out in a bright-green tracksuit.

Lefkofsky had already successfully taken other Web companies public, most notably InnerWorkings INWK -1.78% and Echo Global Logistics, ECHO -1.47% both of which helped other businesses find efficiencies in their supply chains. Half a head shorter than Mason, Lefkofsky had something of a bantamweight boxer’s aspect. He was a trim, youthful 42, and with his dark bushy eyebrows, ever-present glasses, he looked a bit like Groucho Marx without the greasepaint.

The meeting consisted largely of both sides telling each other how great this partnership would be. After observing the niceties, Lefkofsky, Mason, and Solomon were invited into a conference room with a whiteboard, where they negotiated for more than two hours with Google officials until they reached a number—the magic $5.75 billion—that they felt comfortable taking back to Groupon’s board.

Around 9 p.m. Mason, Lefkofsky, and Solomon returned to the Rosewood Sand Hill, a luxury hotel in Menlo Park on Sand Hill Road, the fabled street of dreams for seekers of venture capital in Silicon Valley. The trio retired to Madera, the Rosewood restaurant where many a high-tech deal is sealed and celebrated. It was just before closing time, and they had the place all to themselves.

It was a giddy, potentially historic moment. They were heading back to the Midwest in the morning with an astonishing offer for a team of Chicago upstarts who had started fleshing out the idea for a group-buying site just a few years earlier.

The trio finished their drinks and, warmed by the glow of the restaurant’s large fireplace, contemplated futures growing brighter by the moment.

Only one significant hurdle remained: Google couldn’t guarantee the deal would close. The company did offer a sky-high $800 million breakup fee, but if antitrust concerns held up the sale for a year to 18 months—and perhaps ultimately led the Justice Department to quash the deal—that would be cold comfort for Groupon. In the worst case, the Chicago company could be crippled.

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