Online daily-deals provider Groupon Inc. (GRPN) recently announced that it has completed the acquisition of Korean e-Commerce provider Ticket Monster, popularly known as TMon, for $260.0 million ($100.0 million in cash and $160.0 million in Class A stocks).
Ticket Monster, a subsidiary of LivingSocial Korea Inc., was acquired by Groupon, as announced on Nov 7, 2013. Post acquisition, Groupon divested LivingSocial Korea's Malaysian subsidiary.
Mobile service offerings are increasingly becoming the key growth catalyst for Groupon. The company is shifting toward providing a mobile-based e-Commerce platform, which will help it to reduce exposure to email-based daily deal transactions. In the third quarter, direct email (Push) remained less than 40.0% of North American transaction.
On the other hand, Groupon noted that in Sep 2013, approximately 6.0% of total traffic in North America was related to search activity (Pull), with customers that search spending over 25.0% more as compared to Push customers.
Groupon also noted that in Sep 2013, 75.0% of the North American merchants opted to use Groupon’s search-based platform. The latest acquisition will help the company to solidify its position in the mobile commerce market, which has significant growth potential.
The acquisition will also provide Groupon significant traction in the Korean market, one of the fastest growing e-Commerce markets in the World. Moreover, it will help the company to penetrate the emerging markets of Asia Pacific in the long run.
We believe that Groupon has adopted a prudent policy of making strategic acquisitions. In Sep 2013, it acquired Blink which provides same-day hotel booking service through its mobile app. These acquisitions not only expand its product portfolio and market share but also eliminate competition.
We believe that Groupon is well positioned to gain from rising e-Commerce spending on mobile devices, a profitable domestic market and an under-penetrated international market. Moreover, strong holiday season sales (billings up 30.0%) will boost Groupon’s upcoming quarterly results.
However, we believe that the market is becoming more competitive due to the growing interest of technology stalwarts such as eBay (EBAY), Amazon (AMZN) and Google (GOOG). Moreover, a volatile macroeconomic environment and continued investments to expand its merchant base are expected to impact near-term results.
Currently, Groupon carries a Zacks Rank #3 (Hold).
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