Why Amazon abandoned its $1.4 billion iRobot acquisition

Amazon was set to purchase iRobot, the company responsible for the overwhelmingly popular Roomba line of robot vacuums. They’re so popular that “Roomba” has often been used to describe all robot vacuums, much like how “Googling” is shorthand for searching the web. However, the companies have now announced that the deal is off. Despite the popularity of its vacuums, the deal falling through seems to have brought catastrophic results to iRobot, with the CEO stepping down, 350 people losing their jobs, and the company reporting a significant operating loss.

No regulatory path forward

This was slated to be a big deal that would further Amazon’s already dominant position in the smart home space, which is a large part of why the agreement is no longer going forward. The deal was primarily called off due to what iRobot described as “no path to regulatory approval in the European Union.”

This isn’t a huge surprise, as reports surfaced last November claiming the EU felt the deal could restrict competition in the robot vacuum cleaner market because many of iRobot’s competitors sell their cleaners on Amazon. Regulators felt that Amazon could use its power to delist or reduce the visibility of other robot vacuum products, thus creating a non-competitive marketplace. Regulators worried the move would likely lead to “higher prices, lower quality, and less innovation for consumers.”

The acqusition was first announced in August 2022, and Amazon had until Jan. 10, 2024, to convince regulators that it should go through. However, that date has passed, and Amazon has been unsuccessful in its bid.

Before being canceled, Amazon was slated to pay $1.4 billion for iRobot. As part of the deal falling through, Amazon must pay a $94 million termination fee to iRobot, though that won’t be a big help for the firm, as it took out a $200 million loan last year, and iRobot is likely to put the money from Amazon toward paying off its debt. The announcement also included preliminary fourth-quarter results, and it’s not looking promising, as iRobot reported an operating loss between $265 million and $285 million.

“This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable.”

As expected, Amazon seems disappointed that the sale didn’t go through. “This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable.” said Amazon SVP and general counsel David Zapolsky in a statement.

It sounds like a large part of the issues with the company comes from products outside of its core floor-cleaning devices. As such, it revealed that it would pause work on devices like air purifiers and lawnmowers to focus resources on the successful portions of its business.

While announcing that the deal had been canceled, iRobot chair and CEO Colin Angle announced that he was stepping down from his roles in the company. He co-founded the company in 1990 and has been a major part of the firm since, so it’ll be a massive change for iRobot to move forward without him at the helm. Additionally, the firm has said that about 350 people, approximately 31 percent of its workforce, would lose their jobs. Those affected employees should find out their job status by the end of March, which means everyone working there will be in a state of limbo between now and then.