Skift Take
Uber officials tamped down speculation that it is hungry for a big travel acquisition.
Following reports that Uber had explored an acquisition of Expedia Group, Uber’s CEO and CFO did everything they could Thursday to stress that organic growth is the priority and that acquisitions would face a high bar.
“Now to quickly touch on M&A, we remain extraordinary disciplined, and I want to emphasize that all opportunities are reviewed with a rigorous value creation mindset and Uber’s bar for M&A has never been higher,” Uber CFO Prashanth Mahendra-Rajah said in his prepared remarks during the company’s third-quarter earnings call.
Mahendra-Rajah said “the best deal is not having to do a deal at all,” citing what Uber’s CEO has stated in the past. The highest priorities, he said, were organic growth and capital returns for investors.
The words “Expedia” and “travel” were not uttered during the call with analysts, but one asked for the company’s thoughts on “partnering versus buying your way into a new vertical or new market.”
“So we will continue to selectively evaluate M&A, but it’s a really high bar, and it’s going to have to be both strategic value and financially accretive,” Mahendra-Rajah said.
Khosrowshahi Cites ‘Focus’ and ‘Frequency’
CEO Dara Khosrowshahi picked up on the theme. “So generally, when we look at partner versus acquisitions etc. or whether we want to actively get into an area, really, we ask ourselves: One is, can we really get into an area with a proper focus? Is it substantially related to the core? And then second is like can we add value?” Khosrowshahi said.
Are ridesharing, which is part of Uber’s core business, along with food delivery, and flights and hotel bookings “substantially related?” One can certainly debate that issue, and perhaps Uber has thoughts on the matter based on its testing of in-app travel features in the UK.
Khosrowshahi told analysts Uber is indeed interested in “adjacencies.” The company had food delivery and it expanded into the delivery of groceries, for example, he said.
“Typically, we look for behaviors that are frequent, meaning you can get multiple interactions per month, and also can benefit from our expertise in terms of real-time local logistics as well,” he said.
The issue of frequent behaviors has been a significant one for travel startups. Many travel startups have failed after discovering that travel is typically an infrequent behavior because people for the most part only take a couple of vacations per year.
So travel might not meet Uber’s requirements if it is seeking “multiple interactions per month.”
Khosrowshahi recalled how the company built Uber Eats, its food delivery service, organically.
“So building organically as part of the DNA of this company,” he said.
The Uber CEO wouldn’t rule out acquisitions, however.
“And then if we see something really interesting, we will look at acquisitions,” Khosrowshahi said. “But again, like Prashanth said, we will be very disciplined in terms of those acquisitions because the bar for return on investment is quite high at our shop right now.”
So never say never.
