BuyWithMe acquired by Gilt Groupe, in for another round of layoffs (report)

A boatload of BuyWithMe employees are about to take a permanent “Gilt trip” after the startup’s acquisition.

Gilt Groupe, the luxe-themed website for upmarket flash sales, is reportedly in the final stages of buying struggling daily deals service BuyWithMe.

The latter company all too recently let the world know it was axing more than half of its staff after it was unable to raise a new round of funding. Some feel the layoffs happened to make BuyWithMe a more attractive, leaner purchase for potential buyers.

“The capital market’s willingness to invest in daily deal businesses has dried up,” said BuyWithMe COO David Wolfe in a recent conversation with VentureBeat.

“Our game plan was to raise a significant amount of capital to push this comprehensive service offering deeply into markets and, as a result, change the basis of competition in the daily deal space. We were a little late,” he concluded.

BuyWithMe was the third daily deals site in the U.S. behind heavyweight competitors Groupon and LivingSocial.

However, just a few months ago, Gilt Groupe itself was able to scrape together a respectable $138 million in funding, which left the company valued at a tidy $1 billion.

At the time of the funding, Gilt Groupe chief executive Kevin Ryan told interviewers the company expected to report $500 million in revenue for the fiscal year. He didn’t specifically mention the possibility of an initial public offering, but he did hint that the May 2011 round will likely be Gilt Groupe’s final institutional funding round.