Mikey Tom December 15, 2016
It has been a quite the week for M&A in the food-delivery space.
Just Eat (LON: JE), a London-based food-delivery company, announced Thursday that it has agreed to acquire the UK operations of Delivery Hero, which operate under the brand hungryhouse. The deal has a base purchase price of £200 million, with a further £40 million contingent on performance until closing. Delivery Hero is a Rocket Internet-backed startup that has also raised money from firms including Insight Venture Partners and Kite Ventures. It previously made a significant investment in hungryhouse in 2012.
In a separate transaction, Just Eat revealed it bought North American food-delivery network SkipTheDishes for an initial consideration of £66.1 million, with about £60.1 million payable in cash immediately upon completion of the deal and £6 million payable in 12 months in the form of Just Eat shares; an additional £54.1 million may also be payable subject to certain financial targets being met. Founded in 2013, SkipTheDishes operates largely in Canada, with smaller portion of business coming from the US Midwest. The company previously raised funding from firms including Founder Collective and Golden Venture Partners.
News of these deals come just a few days after Berlin-based Delivery Hero agreed to purchase foodpanda, a food-delivery company majority owned by Rocket Internet. As a result of that transaction, which is expected to close by year-end, Rocket Internet increased its ownership in Delivery Hero to 37.7%.
These deals only continue what has been a big year for consolidation in the food-delivery space. In previous years venture capitalists were enamored with the industry, pumping millions of dollars into startups looking to take Uber's model and apply it to restaurants. Who hasn't thought to themselves "I really wish Starbucks delivered," after all?
The result of this rush of VC investment? Swarms of entrepreneurs and startups working to capitalize on the opportunity. Seriously, a few years ago you couldn't go a week without hearing about a new company that was "the Uber for food."
Well, they couldn't all be winners, and that's become evident this week and throughout the year. While a lucky few will secure soft landings via acquisitions, more than a handful have been forced to close up shop. Others, like foodpanda pre-acquisition, for example, have been trying to sell off portions of operations in an attempt to stay afloat. Examples: here and here.
While the opportunity is rather large, these types of businesses are hard to run profitably—and there really is only room for a select few who do it well (see: Just Eat, Delivery Hero and even Uber).