In a surprising turn of events, Amazon’s proposed acquisition of iRobot, the maker of Roomba, has been officially terminated, as announced by both companies. The cancellation comes as iRobot disclosed that the deal faced insurmountable challenges in obtaining regulatory approval from the European Union.
iRobot, concurrently with this announcement, revealed a comprehensive restructuring plan involving a reduction in workforce, with approximately 31% of employees (about 350 individuals) facing layoffs. The company anticipates notifying the affected employees by the end of March. As part of this restructuring, iRobot’s Co-founder and CEO, Colin Angle, is stepping down, making way for the interim CEO, Glen Weinstein, the current Executive Vice President and Chief Legal Officer. Andrew Miller, previously the lead independent director, is set to assume the role of chair.
In response to the collapse of the deal, iRobot is halting its endeavors beyond its core floor-cleaning product lineup, including the development of air purifiers and lawnmowers. The company will also shutter offices and facilities in underperforming geographic locations.
The termination of the deal imposes financial consequences on Amazon, as the e-commerce giant is obligated to pay a termination fee of $94 million to iRobot. The funds from this fee will aid iRobot in settling a $200 million loan taken out the previous year. iRobot disclosed its preliminary fourth-quarter results for 2023, projecting a GAAP operating loss ranging from $265 to $285 million.
The collapse of the deal can be traced back to regulatory hurdles in the European Union. The European Commission raised concerns in November about potential anticompetitive effects, particularly in the robot vacuum cleaner market. Regulators feared that Amazon’s control could lead to the delisting or diminished visibility of rival products, stifling competition and resulting in adverse consequences for consumers.
Despite the UK competition regulator’s approval in June 2023, Amazon’s efforts to persuade the European Commission before the January 10th deadline were reportedly unsuccessful. The failure of this acquisition is part of a broader trend of significant tech deals facing increased scrutiny from global regulators.
Notable examples include:
- Adobe’s withdrawal from the Figma deal.
- Nvidia’s abandonment of its Arm acquisition.
- Meta’s inability to acquire Giphy.
Amazon expressed disappointment in the outcome, emphasizing the potential benefits the merger could have brought to consumers in terms of innovation and competitive pricing. David Zapolsky, Amazon’s SVP and General Counsel, lamented the regulatory hurdles, arguing that such challenges discourage entrepreneurs and hinder both consumers and healthy competition.
This setback for Amazon contrasts with its history of successfully navigating smart home acquisitions, such as Blink, Ring, and Eero. The termination of the iRobot deal coincides with changes in Amazon’s devices and services business leadership, with Panos Panay taking over from Dave Limp as the top executive in October 2023. These developments underscore the complexities and challenges that major tech companies face in navigating regulatory landscapes while pursuing strategic acquisitions.