DoorDash / Wolt: paying a high price for new markets and Nordic know-how


Wolt presents itself as an outsider in a difficult domestic market. But the Helsinki-based delivery company comes at the cost of a purebred puppy. Its largest US counterpart DoorDash will shell out € 7 billion as part of an all-stock deal as it seeks to boost its post-pandemic growth.

The deal will allow San Francisco-based DoorDash to access 22 new countries and potentially up to 700 million new customers. Its share price jumped in response to the promise of a new growth driver. In the United States, its scope for expansion is limited due to its 55% delivery market share.

In addition, the Finnish company is expanding rapidly. Customer orders grew at an annualized rate of 130% in the third quarter, nearly three times faster than those of the largest DoorDash.

DoorDash leverages Wolt’s expertise in delivering goods, as well as take out food. Finland, with its more equitable distribution of income, its no-tip tradition and long, dark winters is not an obvious place for the odd-job economy to flourish. But Wolt made it work and takes pride in its efficiency. These could provide useful lessons for DoorDash, which has had to increase its hourly rates of pay by more than 30% since the third quarter of 2019.

Lex chart showing the value of the DoorDash business versus the order value

DoorDash will need every lesson it can get, because it pays a heavy price. The deal values ​​Wolt at three times its annualized gross order value of 2.5 billion euros. Using the same metric, Wolt would trade much higher than DoorDash himself and Delivery Hero.

Lex chart showing the DoorDash share price

This is several times the multiple ordered by Just Eat Shares of the Amsterdam-based food delivery company have fallen two-fifths since it announced its $ 7.3 billion acquisition of Grubhub in June 2020. Activist investor Cat Rock wants JET to sell it , arguing that this is a distraction. Grubhub is unlikely to become the market leader in the United States without a strong American partner.

Similar arguments could apply to DoorDash. The European market is hyper-competitive; virtually no overlap exists with Wolt and the deal will not increase profitability, at least in the short term. This boost in the valuation of DoorDash indicates that investors have bet on success in new markets that is far from guaranteed.

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