Roomba’s bankruptcy may wreck a lot more than one robot vacuum maker

Los Angeles resident Ruth Horne, 76, enticed by a bargain, bought what she thought was a Roomba to vacuum her house, but the experience ended in frustration.

“It kept getting stuck somewhere and would then just go around in circles,” Horne said. She realized it was a cheaper knock-off.

Meanwhile, Marcy Lewis, 75, of Madeira, Ohio, had been wanting a robot vacuum cleaner and deliberately chose a knock-off.

“I’m pretty low tech, but it just seemed like a good idea — cleaner house, less work,” Lewis said.

She was watching Prime Day sales and got a good deal on a Eufy robot vacuum cleaner. “I really liked it and it did a good job, but didn’t last long,” Lewis said.

Product quality was one of the advantages for the Roomba in a flood of less expensive knock-offs, but that didn’t save it from the corporate bankruptcy its maker iRobot announced earlier this week. And cheap Chinese competition was not the only factor in its failure. An attempted 2022 acquisition of iRobot by Amazon, thwarted by regulators, and the changing dynamics around mergers and acquisitions, represent an ongoing concern for struggling tech companies that in the past have turned to M&A as not just an exit ramp, but savior.

The company, which Amazon agreed to pay $1.7 billion to acquire in August 2022, reported in a court filing last Sunday that it had between $100 million-$500 million in assets and liabilities, and owed roughly $100 million to its largest creditor, Shenzhen Picea Robotics Co., the contract manufacturer, located in China and Vietnam, which now owns it. In all, Reuters reported the company has $190 million in debt.

“Today’s outcome is profoundly disappointing — and it was avoidable,” Colin Angle, co-founder and CEO of iRobot, told CNBC in a statement earlier this week. “This is nothing short of a tragedy for consumers, the robotics industry and America’s innovation economy.”

In early 2024, Amazon CEO Andy Jassy told CNBC that regulators’ efforts to block the deal were a “sad story” and said it would’ve given iRobot a competitive boost against rivals.

Some M&A experts agree with the view of both the would-be acquirer and bankrupt company.

“The iRobot case demonstrates that when regulators prioritize hypothetical future harms over present-day financial realities, they don’t protect competition; they destroy the target company,” said Kristina Minnick is a professor of finance at Bentley University. “The bankruptcy of iRobot serves as a definitive cautionary tale for the current M&A environment, underscoring fears that regulators are dismantling the traditional safety net for struggling companies,” she said.

Acquisitions are an integral part of recycling assets and growing the economy, but regulators in the U.S. and in Europe have taken a stance in recent years which Minnick says “distorts this natural cycle.”

She added that by blocking Amazon’s white knight acquisition of iRobot, regulators…