Investors have been predicting that a wave of M&A activity will eventually engulf struggling VC-backed companies.
Getir‘s acquisition of rival ultra-fast grocery delivery startup Gorillas, at a reported 61% discount from its 2021 valuation, may be the first high-profile example of a coming trend.
Berlin-based Gorillas was founded in 2020 and quickly found itself in demand amid the pandemic’s lockdowns, raising $1.3 billion from investors including Coatue, Tencent and DST Global. But investors soured on the sector after it became clear that Gorillas and its peers lose money on each delivery and that scaling the business to a break-even point may be impossible.
The purchase by Turkish Getir is a sign that Gorillas was in dire straits. The deal reportedly valued the company at $1.2 billion, down from $3.1 billion valuation it garnered last fall.
Startup-to-startup deals are notoriously difficult to negotiate because the target usually takes the acquirers’ equity as payment, and the two parties need to agree on how much they are worth relative to each other.
The deal values the combined entity at $10 billion, the Financial Times reported, indicating that Sequoia and Tiger Global-backed Getir cut its own valuation from $11.8 billion to $8.8 billion. Despite being the largest rapid delivery company in Europe, Getir is facing the same pressures as others amid changing consumer preferences and a worsening macroeconomic environment.
By purchasing Gorillas, Getir is receiving additional market share and dark stores, which fast delivery companies use as warehouse facilities.
But it remains to be seen whether the combined business will be able to reach profitability, and if other players in this sector such as GoPuff and Jokr will also move toward consolidation.
Featured image by wan wei/Shutterstock
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