Contact: Brenon Daly
In a highly unusual move, the US Department of Justice (DoJ) filed a lawsuit Thursday afternoon against a company that has already closed an acquisition of a rival firm, alleging the deal is anticompetitive. The DoJ says Bazaarvoice did not report its $152m cash-and-stock purchase of fellow online customer review site PowerReviews to either the DoJ or Federal Trade Commission. The transaction was announced May 24 and closed quickly thereafter, on June 12.
The DoJ, which began investigating after the deal had already closed, didn’t specify exactly what part of the acquisition it would seek to unwind. The release said only that the lawsuit ‘seeks to restore competition’ in the marketplace, and DoJ representatives didn’t respond to requests for clarification.
For its part, Bazaarvoice said it spent six months explaining that there would be ‘robust and ample’ competition in the social commerce marketplace following the Bazaarvoice-PowerReviews combination. The company plans to fight the lawsuit and indicated it expects to be ‘fully vindicated.’
As we noted at the time of the acquisition – which was Bazaarvoice’s first purchase, coming just three months after its IPO – the deal represented a significant bet on being able to move down-market, expanding Bazaarvoice’s voice-of-customer platform to SMBs. At the time of the announcement, PowerReviews had more customers (1,100) than Bazaarvoice (737), but only slightly more than one-tenth the revenue.
Whatever the outcome, Wall Street’s reaction to the lawsuit was immediate. Bazaarvoice shares were unchanged at about $9 each for virtually the entire session Thursday. But when the DoJ announcement came out in the final hour of trading, the stock plummeted 15% to about $7.50. The selling pressure continued on Friday, with the stock dipping to $6.65 – the lowest level for the shares since their debut last February. All in, the DoJ’s lawsuit has trimmed $165m from Bazaarvoice’s market value.
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