ACQUISITIONS

CityDeal Europe GmbH Acquisition

On May 15, 2010, the Company acquired 100% of CityDeal Europe GmbH ("CityDeal"), a collective buying power business launched in January 2010 that provides daily deals and online marketing services substantially similar to the Company, primarily in European markets. The acquisition was accounted for using the purchase method of accounting and the operations of CityDeal were included in the Company's consolidated financial statements from the date of the acquisition. In connection with the acquisition, the Company and the former CityDeal shareholders entered into a loan agreement. See Note 15 "Related Parties."

Qpod.inc Acquisition

On August 11, 2010, the Company acquired approximately 55.1% of the total issued and outstanding capital stock of Qpod.inc ("Qpod"), a collective buying power business launched in July 2010 that provides daily deals and online marketing services in Japan substantially similar to the Company. The acquisition was accounted for using the purchase method of accounting and the operations of Qpod were included in the condensed consolidated financial statements from the date of the acquisition.

In conjunction with the acquisition, the Company entered into an agreement with certain founding members and other shareholders of Qpod, which provided the Company with call rights that allow it to buy a percentage of the remaining shares of Qpod. Exercising all of the call rights would entitle the Company to an aggregate of up to 90% of the outstanding capital stock of Qpod. Additionally, the remaining Qpod shareholders had put rights to sell their outstanding capital stock to the Company in the event of an initial public offering of the Company, subject to certain conditions, which if exercised in full, would give the Company up to an aggregate of 90% of the outstanding capital stock of Qpod.

In January 2011, the Company entered into a Stock Purchase Agreement (the "SPA") with the other shareholders, whereby the Company purchased an additional percentage of the shares of Qpod from the other shareholders, increasing the Company's ownership in Qpod to 90%. Under the terms of the SPA, the Company acquired 21,812 shares of the total issued and outstanding capital stock of Qpod, on a fully-diluted basis, in exchange for $25.0 million in cash and $10.0 million of contingent consideration which will be paid over the next three years in equal installments if specified future operating objectives and financial results are met. As of the date of the SPA and December 31, 2011, the Company concluded that the operational and financial result targets were not met for 2011 and the likelihood of achieving the remaining targets is remote for the final two years. The additional investment was accounted for as an equity transaction in accordance with the guidance on accounting for changes in a parent's ownership interest in a subsidiary in consolidated financial statements. In conjunction with the SPA, the Company has call rights that allow it to buy all of the remaining shares of Qpod. Exercising the call rights would give the Company 100% ownership of the outstanding capital stock of Qpod. Additionally, the remaining Qpod shareholders have put rights to sell their outstanding capital stock to the Company, including any shares of capital stock issuable upon exercise of options, which would give the Company 100% of the outstanding capital stock of Qpod.

Other Acquisitions

Throughout the year ended December 31, 2011, the Company acquired certain entities and the results of each of the entities have been included in the consolidated financial statements since the respective acquisitions dates. The primary purpose of these acquisitions was to utilize these entities' collective buying power businesses to further grow the Company's subscriber base and provide strategic entries into new and expanding markets in India, Malaysia, South Africa, Indonesia and the Middle East. In addition, the Company acquired certain businesses that specialize in developing mobile technology and marketing services to expand and advance the Company's product offerings. The aggregate acquisition-date fair value of the consideration transferred and noncontrolling interests ("NCI") for other acquisitions totaled $47.7 million, which consisted of the following (in thousands):



Fair Value of Consideration Transferred and NCI	Fair Value
Cash	$	18,313
Issuance of shares of the Company's non-voting common stock	11,067
Contingent consideration	17,755
NCI	593
Total	$	47,728

The value of the noncontrolling interest represents the fair value of the ownership of the remaining shareholders after Groupon's purchase assuming a discount on that remaining ownership due to the limited control of minority shareholders. The fair value of the remaining shareholders prior to the discount was derived assuming Groupon's purchase price represents the fair value of the ownership acquired.

As of the respective acquisition dates, the Company had obligations to transfer additional cash and stock contingent consideration of $16.3 million and $1.5 million, respectively, to the former owners of certain acquirees as part of the exchange for control of these acquirees, if specified future operational objectives and financial results are met over the next three years.

The Company determined the acquisition-date fair value of these contingent liabilities, based on the likelihood of paying the contingent cash earn-outs and stock issuances of contingent earn-out payments and stock issuances, as part of the consideration transferred. For contingent consideration to be settled in common stock, the Company used private market data to determine the fair value of the shares as of the acquisition date. For contingent consideration to be settled in cash, the Company used an income approach that is primarily determined based on the present value of future cash flows using internal models. See Note 12 “Fair Value Measurements" for subsequent measurements of these contingent liabilities.

The following table summarizes the allocation of the combined purchase price and the fair value of NCI as of the acquisition date (in thousands):



Description	Fair Value
Net working capital (including cash of $3.9 million)	$	3,734
Property and equipment, net	132
Goodwill	36,539
Intangible assets⁽¹⁾:
Subscriber relationships	5,990
Trade names	370
Developed technology	3,547
Deferred tax liability	(2,584		)
	$	47,728


(1)	Acquired intangible assets have estimated useful lives of between 1 and 5 years.

The fair value of consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on their corresponding acquisition date, with the remaining unallocated amount recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was determined using an income or cost approach based on the nature of each asset. The goodwill of $36.5 million represents the premium the Company paid over the fair value of the net tangible and intangible assets it acquired. The Company paid this premium for a number of reasons, including expanding its presence in new international markets and acquiring an experienced workforce. The goodwill is not deductible for tax purposes.

The financial effect of these acquisitions, individually and in the aggregate, was not material to the consolidated financial statements. Pro forma results of operations have not been presented because the effects of these business combinations, individually and in the aggregate, were not material to the Company's consolidated results of operations.

Purchase of Additional Interests

In April 2011, the Company entered into an agreement to purchase an additional interest in one of its subsidiaries for an aggregate purchase price of $21.1 million, increasing its total ownership in the subsidiary to 100%. The purchase price consisted of $9.4 million of cash and $10.4 million in stock. The additional investment was accounted for as an equity transaction in accordance with guidance on accounting for changes in a parent's ownership interest in a subsidiary in consolidated financial statements. In connection with this purchase, certain subsidiary awards were settled in exchange for cash and shares of stock. The total compensation expense of $12.7 million related to the vested liability awards as of the settlement date was equal to the fair value of the consideration transferred. In addition, the Company will recognize $0.6 million of compensation in the form of cash and $0.7 million of stock compensation over a service vesting period of two years in connection with the transaction.

In September 2011, the Company entered into an agreement to purchase an additional interest in one of its subsidiaries for an aggregate purchase price of $19.2 million, increasing its total ownership in the subsidiary to 100%. The purchase price consisted of $10.8 million of cash and $8.4 million in stock. The additional investment was accounted for as an equity transaction in accordance with guidance on accounting for changes in a parent's ownership interest in a subsidiary in consolidated financial statements. In connection with this purchase, certain subsidiary awards were settled in exchange for cash and shares of stock. The total compensation expense of $4.8 million related to the vested liability awards as of the settlement date is equal to the fair value of the consideration to be transferred. In addition, $6.7 million of the purchase price will be recognized as compensation expense over a service vesting period of two years payable in $3.7 million of cash and $3.0 million of common stock.

In November 2011, the Company entered into an agreement to purchase an additional interest in one of its subsidiaries for an aggregate purchase price of $6.8 million, increasing its total ownership in the subsidiary to 96%. The purchase price consisted of $0.3 million of cash and $6.5 million in stock. The additional investment was accounted for as an equity transaction in accordance with guidance on accounting for changes in a parent's ownership interest in a subsidiary in consolidated financial statements. In conjunction with this agreement, the Company has call rights that allow it to buy all of the remaining shares of this subsidiary for $0.7 million cash and 533,336 shares of the Company. Exercising the call rights would give the Company 100% ownership of the outstanding capital stock.