DoorDash to acquire Deliveroo in £2.9bn deal

US-based DoorDash is set to acquire UK rival Deliveroo for £2.9 billion, marking a significant consolidation in the online food delivery market.

The deal highlights the contrasting fortunes of the two companies, both started in 2013, and the differing dynamics of the US and UK stock markets.

Both DoorDash and Deliveroo were founded with similar business models, offering customers convenient access to restaurant food and later expanding into other convenience items. They also went public around the same time, with Deliveroo listing on the London Stock Exchange and DoorDash on the New York Stock Exchange.

However, DoorDash has experienced substantially greater growth in valuation. At the time of Deliveroo’s IPO, DoorDash was valued at five times its UK counterpart. Four years later, this figure has surged to 35 times as much. This disparity has enabled DoorDash to leverage its financial strength to acquire Deliveroo, even as the latter was beginning to achieve profitability.

Several factors have contributed to this divergence. US markets have demonstrated a stronger appetite for growth stocks like DoorDash, allowing the company to raise more capital and fuel its expansion.

In contrast, Deliveroo’s London listing has not yielded the same financial advantages. As Danny Rimer of Index Ventures noted, Deliveroo might have fared better with a US listing.

The deal also reflects a broader trend of UK companies being undervalued compared to their US peers, making them attractive acquisition targets.