Heads will roll at Groupon clone CityDeal

It seems to be the standard procedure following a big acquisition: no sooner have the champagne corks been swept away than a major cost-cutting initiative begins – the corporate buzzwords ‚efficiency‘, ‚consolidation‘ and ‚leveraging‘ are oft-bandied. And when that happens, almost inevitably, heads begin to roll. So it is with Groupon, the much-copied ‚deal of the day‘ operator based out of Chicago, which acquired German clone CityDeal in May this year and is now poised to announce a swathe of German redundancies.

Staff numbers to be reduced at CityDeal

According to unconfirmed and anonymous reports from sources inside the company, between 60 and 70 of a total 300 staff in Germany are likely to be laid off, with the majority coming from marketing. Other sources speak of layofffs in the low triple digits, although this could not be confirmed. Groupon CityDeal has grown very rapidly and now employs some 700 staff. By contrast, the Groupon mothership itself employs around 300 for its entire US operation. Although CityDeal operates in 16 countries across Europe and requires native-speaking staff in sales, operations and customer support, having more than twice the number of employees as the parent company has made it an obvious target for cutbacks. According to our sources, a conference room has been rented in a hotel opposite CityDeal’s HQ, where over the course of two days staff will be shepherded in and fired on the spot.

The official line: 4% of CityDeal employees will go

Daniel P. Glasner, managing director at CityDeal, said that less than 4% of the workforce were affected. „Since the beginning of the year we have grown very strong internationally,“ he said by e-mail. „Not unusually, as part of this expansion, in the last few weeks we have further optimised the company structure and reassessed the competencies and profile of our staff in line with out international requirements. This affects less than 4% of staff.“ This equates to 28 employees in Europe, or 40 if one takes Groupon’s international workforce as a whole. „We are currently taking on new staff every week throughout our European business,“ he added.

A twist in the tale: DailyDeal

The redundancies at CityDeal are somewhat surprising given that in recent months the company has been aggressively headhunting people from its main German competitor DailyDeal, many of whom will now be out of a job. According to those affected, they were offered salaries that were double or even triple what they were earning at DailyDeal. The strategy appears to have been to headhunt DailyDeal staff with the most specialist knowledge to strengthen CityDeal and simultaneously cripple the competitor.

That CityDeal would want to recruit staff from its biggest competitor makes perfect sense, but it seems implausible that there was a pre-meditated strategy to lure them in with high salaries only to cut them loose a few months later. More likely is that Groupon CityDeal’s bloated overheads have become a factor and the company simply cannot pay the high salaries of its latest recruits.