Uber's M&A Playbook Faces Scrutiny: CFO Says Acquisitions Can Beat Building From Scratch

• An analyst raised concerns about Uber's $18 billion in acquisitions, saying the returns from these deals remain uncertain. 
• Uber CFO Balaji Krishnamurthy defended its M & A strategy, saying Uber also grew organically and that ezCater's larger orders could improve Delivery Hero profits. 
• Krishnamurthy acknowledged past acquisition mistakes but said newer deals are performing ahead of expectations.

Uber Technologies' (UBER) acquisition strategy is drawing investor scrutiny as CFO Balaji Krishnamurthy defends the company's decision to buy established businesses rather than build every capability internally. Krishnamurthy said acquisitions can boost expansion, improve returns and leverage Uber's global platform, while newer deals show early signs of strong execution. 

Uber Technologies stock edged 0.2% lower in Thursday's premarket. However, the stock is on track to reverse five weeks of losses. 

Uber's $2.3B Bet On ezCater Raises Question About M & A Strategy 

Uber said on Wednesday that it will buy ezCater, the largest online catering marketplace in the U.S., for $2.3 billion in cash. The deal gives Uber access to workplace meals, events, and large group orders. ezCater works with more than 140,000 U.S. restaurants and has generated over $2.5 billion in bookings in the past year. Its average order is above $400, making catering more valuable than typical individual food orders.

Writing on the subject, Abdullah Al Rezwan, an equity analyst who goes by the name Mostly Borrowed Ideas on X, said that though the deal is relatively small compared with Uber's roughly $145 billion market value, it highlighted a trend: DoorDash (DASH) often builds new businesses, while Uber tends to buy them. In his newsletter, Rezwan also analyzed whether Uber is paying too much and how it is using its capital.

The analyst sounded doubtful about Uber's aggressive acquisition spending. He stated that buying outside businesses is much harder to evaluate than investing in Uber's own operations. Uber has committed about $18 billion to deals, including SpotHero, Getir, Delivery Hero and ezCater, versus about $10 billion in recent free cash flow. It has also pledged more than $10 billion to outside autonomous-vehicle partners, making the returns harder to predict. 

The analyst compared this with CEO Dara Khosrowshahi's time at Expedia. He said Expedia spent about $6 billion on acquisitions that increased bookings, but adjusted earnings per share grew only about 7% a year. Citing Warren Buffett's 1987 letter, the analyst added that some CEOs struggle to use company cash effectively and may depend too much on bankers and consultants to support deals that can hurt long-term shareholder value. 

UBER CFO Defends Acquisition Strategy 

Responding to the analysis, Uber CFO Balaji Krishnamurthy pushed back in an X post on the idea that DoorDash has grown primarily through internal development while Uber has relied heavily on acquisitions. 

Krishnamurthy said,“Uber didn't deploy any capital on M & A between 2022 to 2024, while organically establishing category leading positions across Mobility and Delivery globally. Meanwhile, nearly the entirety of Doordash's international business is built on fairly expensive acquisitions (Wolt, Deliveroo), and it has acquired substantials assets to expand into new verticals as well (Sevenrooms, Grub Campus etc).”

“If you add up the deployments, you'll find that Uber has deployed a significantly smaller portion of its FCF on acquisitions than DD has, while delivering steady ~20% growth off a much larger base.”

The CFO also defended Uber's purchase of ezCater, saying the economics of different types of bookings should not be judged solely by their overall volume. Uber uses higher-value businesses to support lower-cost offerings that can attract customers and increase usage across its platform.

According to Krishnamurthy, ezCater generates orders that are nearly 10 times larger than a typical U.S. delivery transaction. He said the business should immediately benefit Uber's Delivery profit and could provide additional growth as the company integrates it with Uber for Business and expands internationally.

Uber CFO Gets Into Build Versus Buy Debate

Krishnamurthy said corporate catering requires specialized technology, merchant support and logistics capabilities. Rather than spending years developing those capabilities internally, Uber can boost its entry into the category by acquiring an established operation and combining it with its existing global distribution network.

“That doesn't mean it can't be built, but this acquisition leapfrogs Uber well ahead. Combined with our distribution and global footprint, an acquisition allows us to scale this category much faster.”

Uber's Lessons From Earlier Deals

Krishnamurthy admitted that some of Uber's 2020 and 2021 acquisitions did not perform as expected. He said poor planning for combining the businesses was a key reason, prompting Uber to pause acquisitions for several years. 

“It's a fair critique that of the M & A we did in 2020-21, not all were successes. It's a big reason why we paused any further acquisitions in 2022-24. As we look back at our deals from that era, the key reason we did not execute well on all our deals was that we did not have a well formed integration plan ahead of the acquisitions.”

The CFO said newer transactions, including Trendyol Go, SpotHero and Getir, are performing ahead of their initial plans. He added that periods of market disruption can create attractive opportunities for selective M & A, although Uber evaluates each potential transaction independently.

UBER Stock: Retail View 

On Stocktwits, retail sentiment around the stock remained in 'bearish' territory. 

UBER stock has declined 16% year-to-date. 

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