Groupon is considering acquiring another company and insiders think Yelp could be the target, The Wall Street Journal reported on Thursday, September 12.
“It is reasonable to conclude that a relatively large acquisition by Groupon is forthcoming,” Robert Chapman, founder of California investment firm Chapman Capital, told the WSJ.
Chapman sold part of his 10 million share stake in Groupon on Tuesday, September 10, because he considers a large acquisition too risky for Groupon. According to the Journal, he wants the Chicago-based daily deals company to buy back more of its own stock.
Sources familiar with the situation told the paper Yelp “would be a logical matchup” and the combination of the two companies could bring as much as US$1 billion in earnings before interest, taxes, depreciation, and amortization. A merger could save at least US$200 million due to synergies, the sources said.
“We will be closely monitoring [Groupon’s] activity to see if it does attempt a larger-scale and potentially transformative deal, which would be a riskier strategy,” Tom Forte, an analyst at D.A. Davidson & Co, told the news outlet.
A combination also could create an online marketplace in which merchants could offer deals and customers could read reviews, make reservations or purchase goods or services.