Uber downplays mergers and acquisitions after Expedia deal reported

Skift Take

Uber officials have dismissed rumors that the company is coveting major travel acquisitions.

Dennis Schaal

Following reports that Uber was considering acquiring Expedia Group, Uber’s CEO and CFO on Thursday were at pains to stress that organic growth is a priority and that acquisitions will face a high bar.

“Now, to move quickly to M&A, we remain extremely disciplined, and I want to emphasize that all opportunities are approached with a rigorous value creation approach, and Uber’s bar for M&A has never been higher,” said Uber’s CFO. Prashant Mahendra-Raja in his prepared report. remarks during the company’s third-quarter earnings call.

Mahendra-Raja said that “the best deal is no deal at all,” citing what the Uber CEO has said in the past. Organic growth and return of capital for investors are the highest priorities, he said.

The words “Expedia” and “travel” weren’t uttered during the call with analysts, but one asked the company’s thoughts on “partnering rather than buying a path into a new vertical or new market.”

“So we will continue to selectively evaluate M&A deals, but this is a really high bar and it has to be both strategically valuable and financially rewarding,” Mahendra-Raja said.

Khosrowshahi mentions “focus” and “frequency”

CEO Dara Khosrowshahi echoed this theme. “So typically when we look at partnerships versus acquisitions, etc., or whether we want to aggressively get into an area, we ask ourselves, number one, can we actually get into that area, paying due attention? Is it significantly related to the core? And secondly, can we add value?” – Khosrowshahi said.

Are ride sharing, which is part of Uber’s core business, along with food delivery and flight and hotel bookings, “materially related”? Of course, it’s debatable, and Uber may have thoughts on the matter based on testing of the app’s travel features in the UK.

Khosrowshahi told analysts that Uber is indeed interested in “adjacent businesses.” The company had a food delivery business and expanded into food delivery, for example, he said.

“We typically look for high-frequency behavior, which means you can get multiple interactions per month and can also benefit from our expertise in terms of local logistics in real time,” he said.

The problem of frequent behavior has been important for travel startups. Many travel startups have failed after discovering that travel tends to be infrequent, as people mostly only take vacations a couple of times a year.

Thus, travel may not meet Uber’s requirements if the company is aiming for “many interactions per month.”

Khosrowshahi recalled how the company organically built its food delivery service, Uber Eats.

“So building organically is part of the DNA of this company,” he said.

However, Uber’s CEO is not ruling out an acquisition.

“And then if we see something really interesting, we will look at acquisitions,” Khosrowshahi said. “But again, as Prashant said, we will be very disciplined about these acquisitions because the bar for return on investment in our store is quite high right now.”

So never say never.