Would You Turn Down $6 Billion from Google?

Word is today that Groupon has declined to accept Google’s offer of $6 billion for the company (see two Forbes articles here and here, a MarketWatch article and one in Barron’s, plus the original scoop is from Melissa Harris at the Chicago Tribune). There hasn’t been any tangible reason given at this point, and few guesses. It raises a larger question, though: would you turn down money now for your business, or decline on the expectation of more money (either via growth/profit or future IPO) later? I guess that depends on your business, how valuable you think it will be, and the prospects for it.

I’ll get this out of the way about Groupon: I’m on the fence as to whether declining the offer makes sense or not. On the one hand, much of their business has a pretty low barrier to entry. A company like Google could potentially replicate some of it for a lot less than $6 billion. Granted, Groupon is already there and has built a name for itself, but some brands are insurmountably in control of their market. Maybe Groupon has staying power, and a future, in which case the $6 billion now would be a lot less than a much larger IPO later. This won’t be the first big bet someone makes, and it won’t be the last.

Returning to the bigger question: would you sell? When looking at any offer, there are a couple of elements that I would consider. The first is the time value of money: cash money now is worth more than maybe more money in the indeterminate future. Put more colloquially: a bird in the hand is worth two in the bush. You can calculate discount rates and such all you want, but the simple story is the best. A real dollar in your pocket now is worth more than a maybe-$1+ down the road.

The other consideration is whether or not your company is better off being part of something bigger, or if you believe you can make it bigger on your own. The list of companies that other companies like Google, IBM, Microsoft, etc have purchased is huge. I saw one list for Google that listed hundreds of companies, most very small, that were bought by Google. Your world-changing concept, product or service may end up languishing in the inventory of a larger company, stifled and smothered until it dies from negligence. For some, they believe that they can make “their thing” work, and make them more money, than it would if it were part of some larger organization.

The last consideration is less about money and more about what you (and your partners) want, personally and professionally. Every deal has a price, but it also comes with a cost. Take being bought by Google: sure, they could be offering top dollar for your business, but do you want to work for Google? Don’t get me wrong, from everything I’ve heard, Google can be an awesome company to work for, and the amenities at the Googleplex are legendary. But not everyone wants to work for a large (or larger) corporation. There is value in having your independence. Of course, a deal with Google may allow you and the other founders to leave at some point, but you can bet the price will include terms for how long you have to stay (and more money typically would mean a longer stay with the company). Being bought by someone bigger can be a waypoint in your life, and not a destination, and one that can make it easier to raise money in the future. But it does mean that you have to be willing to work for someone bigger, within the bounds of their corporate culture, and it may also require relocation for a time.

It may seem like an easy decision when a lot of money is waved at you, but the price and the cost are two different things. If you can get lots of money, don’t have to move, and basically all you do is change the logo on the website, then the decision could be easier. But if the deal comes with a lot of strings, I could see some companies turning down big money for reasons other than “we can make more on our own”.

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