New Uber CEO Dara Khosrowshahi has a reputation as a savvy dealmaker. We’ll be watching how good he is as he maps out the acquisitions the ride-sharing company will take on next.
One deal is almost certainly out of the question due to the scrutiny it would face from antitrust regulators. Lyft Inc. looms as Uber’s fiercest competitor, although its market share is significantly smaller – around 20 percent versus Uber’s roughly 80 percent, depending on the region. In some cities, the two companies are the only options for riders looking for a convenient, and cheap, trip across town.
A few years ago, a Lyft purchase might have been Uber’s best strategy to achieve its goal of becoming a ride-sharing monopoly. Now, as Uber is hemorrhaging cash and faces competition from other companies, its smartest growth strategy seems to be spreading vertically rather than horizontally.
“The companies are too big to escape antitrust review,” said Evan Rawley, a professor at the University of Minnesota who’s tracked the business approach of Uber and Lyft. “Something like that will definitely raise eyebrows.”
Rawley predicted that Uber will have its eye on scooping up businesses that buoy its automotive vehicle and delivery segments.
Some of Uber’s recent deals point to that plan. In 2016,Uber bought self-driving technology company Otto and artificial intelligence startup Geometric Intelligence. Uber also is reportedly in talks to acquire the engineering team from struggling startup Luxe, a door-to-door valet service.
Congress is back this week and antitrust devotees will be looking to see when (and if) senators will confirm Makan Delrahim, the nominee to lead the Justice Department’s antitrust division.
The White House may also get around to nominating a permanent chairman of the Federal Trade Commission, as well as fill out its three empty seats with other picks.
Hogan Lovells Sept. 7 will host a media roundtable with its M&A partners to discuss the Trump administration’s impact on transactions. A question for the panel (and our readers): How has an absence of antitrust officials at the agencies affected dealmaking?
“This is not a time where wholesale reform of the antitrust laws is in order,” said Diana Moss, president of the American Antitrust Institute. “It will take up significant energy and time, and I don’t think it will go anywhere.”
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