Sunday, May 19, 2024

Deep Dive: Delivery Hero’s acquisitions in Middle East, North Africa & Turkey

The multinational food (and grocery) distribution giant Delivery Hero, headquartered in Berlin, is one of the largest technology firms with local operations in the Middle East. In 2019, after seeing a 126 percent rise from the year before, it received nearly $800 million in revenue from the Middle East, North Africa, and Turkey. This was almost half the total income of the organization from its activities around the world.

The company currently has a market cap of close to $25 billion and its MENA business is responsible for at least one-third of the company’s sales.

What is even more interesting is that the Middle East is the only area where Delivery Hero has been able to have a positive EBITDA of $24 million and $18 million in 2017 and 2018 for two consecutive years. The Middle East business also had a positive EBITDA of $70 million in 2019, but it was negative $22 million as the company spent heavily in dark shops and kitchens in the area.

At the heart of Delivery Hero’s rise in the Middle East (and to some degree in other parts of the globe as well) is one thing: Acquisitions.

From 2015 to 2020, the German corporation invested over $1.2 billion in the Middle East, making it one of the region’s largest purchasers of technology start-ups. In the area, there were a handful of $100 million exits and Delivery Hero was directly involved in four of them.

  • Yemeksepeti

HQ: Turkey – Acquired for $589 million – Acquired in 2015 – Founded in 2000

It began with the acquisition in 2015 of the Yemeksepeti Turkish food delivery network. Yemeksepeti was purchased by Delivery Hero for $589 million. At that time, it was the biggest acquisition in the online food ordering room and one of the largest to date for the Turkish startup ecosystem to the best of our knowledge.

It was processing over 3 million a month at the time of the purchase, and was a profitable company. With General Atlantic, Endeavor Catalyst and MENA Venture Investments as its partners, it has raised over $44 million in total funding.

As Delivery Hero’s only business in Turkey, Yemeksepeti continues to exist and is one of the leading food delivery brands. Nevzat Aydin, its founder, continues to lead the company in the country to this day.

  • Carriage

HQ: Kuwait – Acquired for $100-200 million in 2017 – Founded in 2016

Just before the German business went public in June 2017, Kuwaiti food delivery start-up Carriage was acquired by Delivery Hero. Just fourteen months before its acquisition by Delivery Hero, Carriage was established. At that time Delivery Hero was operating via Talabat in Kuwait, but Carriage quickly lost the market. As the young Kuwaiti start-up had its own fleet, it was able to provide restaurants with both food ordering and distribution solutions. Alabat, partner of the Delivery Hero, only provided restaurants with online food ordering options at the time, and they had to deliver the food themselves.

A few months after the acquisition, the company’s financial filings revealed that Delivery Hero had paid $100 million for the purchase of Carriage, which is a remarkably large sum for a start-up established only 14 months earlier.

Apparently, Delivery Hero was interested in Carriage (and was willing to pay such a price) mainly because it was losing it to Kuwait, one of its most important Middle East markets. Its 2018, revenue in Kuwait was $110 million after the acquisition.

The Kuwaiti start-up had never publicly reported any funding round and had begun with $1.3 million of capital invested by its founders, according to what is available online.

  • Zomato

HQ: India – Acquired for $172 million in 2019 – Launched in MENA in 2013

Delivery Hero acquired Zomato’s company in the United Arab Emirates in 2019, six years after it was launched by the Indian start-up in the United Arab Emirates. Delivery Hero paid $172 million for the purchase and also invested $50 million in Zomato’s global company at the same time.

At that time, the company said that the purchase of the UAE business of Zomato would add 1.2 million monthly orders and $2 million in monthly sales to its Middle East & North A business.

As its main brand throughout the region (except Saudi), Delivery Hero has gradually consolidated its operations under Talabat, which saw Carriage and Otlob fade away, but Zomato’s company is still operating in the UAE with its own brand.

Indirect Acquisitions

In addition to the companies that have become part of Delivery Hero as a result of direct acquisitions, several, including Talabat and HungerStation, have indirectly landed in its kitty. Talabat was part of the food delivery company that Delivery Hero acquired in December 2016 from Rocket Internet. Rocket Internet had purchased Talabat for $170 million about two years before that. Talabat is now the leading Delivery Hero brand in the Middle East, thanks to the Samwer brothers.

HungerStation is now owned by them because of the Rocket Internet, another very popular and apparently most troublesome Delivery Hero brand (in the Middle East). Right prior to its acquisition by Delivery Hero, Foodpanda, the food delivery company of Rocket Internet, had merged with HungerStation.

Otlob (which changed its ownership several times before being sold to Rocket in 2015), 24h.ae, and ifood.jo are several of the other Middle Eastern companies indirectly acquired by Delivery Hero.

New Competitors continue to make their presence felt

Despite the Delivery Hero dominating the Middle East food delivery room, the new local rivals just keep popping up with some global players also continuing to expand into the area.

Earlier this year, Jahez, a Saudi food distribution company founded in 2016, raised $36 million in the nation’s largest VC deal. Also, Elmenus raised $8 million in Egypt to take on Otlob (now Talabat). Getir, based in Istanbul, focuses primarily on ultrafast grocery delivery, but supplies food too which have received $38 million from Michael Moritz of Sequoia Capital and some other investors.

What is interesting, however is that for both the founders of these companies and their investors, Delivery Hero continues to be one of the strongest exit choices. There is hardly anyone else who is able to make bets of a hundred million dollars on these firms.

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