DoorDash’s record acquisition of Britain’s Deliveroo food delivery giant just got a big boost from regulators in Europe. The European Union has consented to consider the $3.9 billion acquisition under its simplified merger review process, which typically involves smooth sailing in the approval pipeline.
That makes life easier for DoorDash because it means EU regulators don’t have much real competition concerns with the deal. When the European Commission does apply the simplified procedure, it usually means that they’re not really worried that the deal is going to hurt market competition, so it’s much more likely that they’ll approve it.
The transaction, which was announced last month, is among the largest cross-border food delivery transactions. It is DoorDash’s strategic acquisition, which would give the US firm a strong presence in European markets following its previous expansion when it acquired Finnish food delivery platform Wolt in 2022.
DoorDash and Deliveroo: The Post-Pandemic Food Delivery Slump
The timing of the deal is a fascinating tale of the post-pandemic condition of the food delivery market. The London Stock Exchange-listed food delivery firm Deliveroo has not had a great run of late. Shares in the company have fallen by around 50% since its float in 2021, mirroring the wider ailments of the food delivery market as the pandemic boom subsided.
The lockdown boom for online ordering of food has collapsed dramatically as shoppers have returned to eating out and cooking at home. The change has forced delivery firms to seek alternative sources of growth and profitability. Deliveroo’s dilemma came even more starkly when the group dropped plans for a Hong Kong listing, indicating management wanted to concentrate on its core business over expansion.
DoorDash Riding High on Strong Performance
While Deliveroo has been under pressure, DoorDash is a different story. The shares of the US firm have climbed about 6.5% since it revealed the Deliveroo deal on July 1, and are more than 50% higher this year. The strong stock performance is a sign of investor confidence in DoorDash’s strategy and execution.
The optimism stems from the company’s latest quarterly report. DoorDash performed better than expected and set a positive tone for the upcoming quarter by demonstrating that it can thrive despite the headwinds facing the overall food delivery market. This solid financial foundation places DoorDash in a good position to make large transactions such as the acquisition of Deliveroo.
What does All This mean for the Food Delivery Scene?
If cleared, the deal would significantly reshape the global food delivery industry. DoorDash would gain Deliveroo’s established business in the UK and elsewhere in Europe, giving it a significantly greater global presence. Such geographic diversification can offer DoorDash an escape from its dependence on the competitive US market and tap new growth opportunities.
The deal is also evidence of a broader movement toward consolidation among food delivery companies. As expansion decelerates and competition intensifies, businesses are embracing merging and acquiring their way into more powerful marketplace positions and higher efficiency. DoorDash’s earlier acquisition of Wolt had demonstrated its aspiration for global expansion, and the acquisition of Deliveroo ups the ante.
Market Sentiment Remains Cautious
Despite the good news, retail investor sentiment on places like Stocktwits is neutral to begin Tuesday. This suggests that while the overall news is good, investors want to see how the deal works out in real life.
The streamlined EU approval process can assist in getting the wheels turning earlier, but regulatory hurdles remain, and integration issues need to be overcome. Merging two large food delivery companies in some markets is never going to be easy, even with regulators’ approval.
In the meantime, the EU’s accelerated review is a significant milestone for DoorDash’s business growth in Europe and perhaps the start of the company becoming a true global food delivery giant.
