Buyers of Groupon shares on secondary markets might feel like they’re getting a bargain given the fall in Groupon’s speculated valuation, but recent daily deal M&A valuation multiples suggest that even the relatively cheaper price for Groupon they paid may have still been excessive vs. comparable transactions.
For those following the bouncing ball that is Groupon’s speculated valuation, you may remember that following the June announcement of Groupon’s upcoming IPO, the valuation was rumored to be in the $25 to $30 billion range. Following an onslaught of bad news, executive departures and critical financial analyst commentary, the sentiment on the company’s prospects has soured markedly. And all the negativity has resulted in $10-$15 billion of rumored market value being lost as recent secondary market transactions pegged the company’s valuation at $14.9 billion. These transactions were reported to be occurring on SharesPost which competes with SecondMarket in the market to trade equity in illiquid private companies.
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M&A activity in the Daily Deal space has accelerated with Q2 2011 and Q3 2011 (through just its first 2 months) on pace to exceed all the cumulative M&A activity seen in the industry since 2009. Since 2009, 72 acquisitions have occurred in the daily deal space with 44 in just Q2 and Q3 2011.
But while daily deal acquisition activity has climbed significantly in recent quarters, valuation multiples for transactions have been dropping – quickly and significantly. Acquisition multiples on a Price per Subscriber and Price per Voucher Sold basis have dropped 36% and 40% respectively since their peak hit just two quarters ago in Q1 2011.
Also, based on the observed M&A multiples in private company transactions, the implied valuations of Groupon and LivingSocial are significantly below rumored IPO valuations and even recent secondary market transactions.
But despite the recent spate of negative sentiment and falling valuations, the enthusiasm for the space remains steady with a significant number of rumored entrants still eyeing the daily deal space.
To download the entire Daily Deal M&A Activity and Valuation Multiples report, go
here.
The infographic below summarizes key findings of the report and is followed by the report’s executive summary. If you’d like to download the entire report with all the valuation multiples, acquisition transactions and details on the the acquirers, investors, targets and rumored entrants into the space, you should go here.
Continue reading “Report: Daily Deal Acquisition Activity Way Up & Valuations Way Down” »
