By Tudor Popescu, Bella Chen, Devashree Goenka and Max Averbach (University of Chicago), Knut Örnéus, Anna Muižniece and Jacob Andersson (Stockholm School of Economics)
Photo: Cristiano Pinto (Unsplash)
Overview of the deal
Acquirer: DoorDash
Target: Wolt
Total Transaction Size: $8.1bn
Announcement date: 9th November 2021
Expected close date: H1 2022
Acquirer advisor: Goldman Sachs
Target advisor: Qatalyst Partners
American food delivery giant DoorDash has announced to acquire the Finnish online food platform Wolt in an all-stock transaction worth $8.1bn, which is the greatest acquisition yet in the industry in Europe. It is DoorDash’s second acquisition in 2021 and sixth in total.
For DoorDash, the acquisition will enable the firm to access 22 new countries corresponding to 700 million potential customers. The combined firm will also broaden the total available market (TAM), enhance investment efficiency and improve the profit potential in the long-term through increased combined product expertise and operational excellence.
Furthermore, DoorDash believes that the acquisition will lead to accelerated product development, a larger focus on multiple markets, as well as increased value to both customers and couriers. The long-term ambition with the merger is to create one of the global leading players in the food delivery industry.
“DoorDash and Wolt share a vision to build a global platform for local commerce that empowers the communities we operate in.” - Tony Xu, Co-founder and CEO of DoorDash
Company Details (Acquirer - DoorDash)
DoorDash is an American public company that provides an online food ordering and food delivery platform. The firm is headquartered in San Francisco, California, and was co-founded in 2013 by its CEO Tony Xu. DoorDash has grown rapidly since its foundation but experienced a significant rise in the use of its platform after quarantine measures were implemented due to the Covid-19 pandemic. The firm has today over 20 million customers and 1 million couriers in the United States, Canada, Australia, and Japan.
Founded in 2013, headquartered in San Francisco, California (USA)
CEO: Tony Xu
Number of employees: 6,000
Market Cap: $62.78bn (as of 1/12/2021)
EV: $58.99bn
LTM Revenue: $4,558m
LTM EBITDA: $-465m
LTM EV/Revenue: 12.9x
LTM EV/EBITDA: -126.9x
Company Details (Target -Wolt)
Wolt is a Helsinki-based technology company that works with 30,000 restaurant partners to deliver food to 10 million customers. Their app allows customers to have food delivered to them or arranged for pick up. Since its founding, it has expanded to 23 countries in more than 129 cities across Europe, the Middle East, and Japan.
Founded in 2014, headquartered in Helsinki, Finland
CEO: Miki Kuusi
Number of employees: 4,000
Market Cap: Not Listed
EV: $850 million
LTM Revenue: N/A
LTM EBITDA: N/A
LTM EV/Revenue: N/A
LTM EV/EBITDA: N/A
Projections and Assumptions
Short-term consequences:
In the short term, there are notable changes for both company shareholders and management. In this all-stock transaction, DoorDash equity issued as part of the transaction will be valued at $206.45 per share, based on DoorDash's 30-day Volume-Weighted Average Price (VWAP) as of November 3, 2021. The exit valuation for Wolt’s largest shareholders, EQT Ventures and EQT Growth, represents an approximate 200x uplift compared to their initial investment in 2016.
With Wolt's negative profit margins the deal will most likely be dilutive at first, however, on the news of the deal, DoorDash shares surged 24%, reflecting positive expectations from investors.
All of Wolt’s 4,000 employees will remain active under DoorDash, including Wolt co-founder and CEO Miki Kuusi, who will serve as the head of DoorDash International. Moreover, Doordash has created a new retention pool of approximately € 500 million reserved for Wolt management and employees.
Notably, this acquisition will propel Doordash into a global player at scale across 22 more countries. This deal will bolster its footprint in Berlin, Tokyo, and a string of smaller Eastern Europe markets where Wolt has flourished. The deal follows the larger trend in the online food delivery industry of consolidation and international expansion, which has led to several high-profile transactions with a similar rationale, including Uber’s $2.65 bn acquisition of Postmates and Just Eat Takeaway’s $7.3 bn acquisition of Grubhub.
Long-term Upsides
DoorDash and Wolt share a common vision to create and enhance a local commerce platform that empowers their communities of operations. Wolt has a strong culture of operational rigor and optimism, under the leadership of Miki Kuusi, and its attention to detail is evident through its retention rates and strong customer loyalty. With Wolt’s operational expertise, technological innovation, and acute focus on consumer commerce, the combined company can forge a leading local commerce platform and experience successful growth over the years. In addition, through the acquisition, the two companies would see a synergy of resources and ideas, causing product development and value improvement provided to customers and merchants. Moreover, both the companies would be able to bring greater focus to each of their markets.
Wolt currently has operations in 23 countries including Asia (ex. Kazakhstan and Azerbaijan) and Europe (ex. Germany and Poland). Through the acquisition, Doordash gets access to a further 22 countries in which it didn’t previously operate, which would support rapid expansion into retail international restaurants, and grocery by several years.
Since Wall Street valued Doordash’s acquisition of Wolt favorably, it is seemingly bullish. Thus, buying Wolt would enable DoorDash to earn various quarters of revenue growth news which in turn would reinforce Wall Street’s current optimism.
Risks and Uncertainties
Acquiring Wolt’s existing customers and partnerships are coming at a rather substantial premium for DoorDash. The company's previous food delivery acquisition, Caviar, boasted nearly 1 million luxury dining users, all acquired for $410 Million. Wolt’s 10 million users and 30 thousand restaurant partnerships may then be relatively unimpressive given a cost per user of $810, nearly double that of what DoorDash paid per user for Caviar.
As regards Wolt’s network, Wolt’s biggest hubs are in the Nordic countries and Eastern Europe. Troublingly, Wolt barely registers in the food delivery markets in France, England, Germany, Spain, Italy, Russia, or the Netherlands. The biggest European markets with the most expendable income, and those that have seen the strongest pandemic increases in food delivery spending, are the places where Wolt has not established a presence. This fact could cast doubt on the claim that Wolt’s European network is as valuable as an $8.1 billion target price would suggest.
DoorDash’s long-time strategy of focusing on suburban food delivery markets instead of immediately contending for large urban centers is something that this acquisition could allow the company to attempt in Europe. In securing Eastern Europe and the Nordics (areas competitors aren't focusing on), they can more effectively push into the larger markets of Western Europe.
However, the distinction between suburban to urban America and Central to Western European nations is quite vast. Secondly, this strategy showed the best results during the pandemic, when those in suburban communities who live far from delivery items had the greatest demand for DoorDash’s services. In a mostly post-pandemic world with international markets, there is some uncertainty as to whether or not DoorDash’s corporate development can synchronize with Wolt’s existing hubs.
“The partnership with Wolt will really lay the foundation for us to operate across over 20 countries serving 700+ million people and gives us the foundation to have single threaded leadership and focus on building a global business.” - DoorDash Co-founder and CEO Tony Xu