Thread by @mario_cibelli

My instinct is that the market is currently setting business values that may be planting the seeds for the next round of consolidation in global delivery.

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https://twitter.com/mario_cibelli/status/1336165838919962624

Among other things, business fundamentals and expectations combine to imprecisely drive share prices/asset values. In turn, those same share prices/values can also shift fundamental opportunity sets h/t reflexivity.

Changing prices can open up previously closed windows on strategic M&A and create new opportunities that might not otherwise exist at different values.

It's a bit like three dimensional chess and in a competitive world, sophisticated global operators with high aspirations will not ignore asset prices as they consider buy vs build decisions across the field of play.

There’s a price where 'legacy' delivery marketplaces become very tempting targets for logistics operators to combine with in order to create more scale and efficiency, even if they tend to favor organic growth.

While marketplaces are losing 'share' of GFS/GOV to logistics generally speaking, they remain very sticky consumer apps and are surely profitable to their owners especially on a contribution basis.

Creating more scale & efficiency in delivery by marrying pre-existing, marketplaces that have loyal user bases w/ large logistics networks makes all the sense in the world especially when considering how big & competitive the 'deliver anything' business is & will be going forward

Some fast growing logistics networks may believe that they can take marketplace economics over time & make them their own but the most opportunistic, rational operators will always work the buy vs build equation into their calculus b/c if they don't someone else surely will.

There’s a price to continue building over time and there’s a price to buy right now so that operators don’t have to spend years trying to bleed a competitor or lose an important asset to another industry participant.

Regulatory/anti-trust considerations are potential speed bumps of course but one positive of the on-demand convenience/deliver anything trend is that as the TAM expands, so does the list of competitors. Restaurant food delivery is fast giving way to simply delivery.

Further, as virus life really starts to roll over, food delivery, outside of dark kitchens, will go back to its usual role of being the minority portion of the business and take the intense focus (and fee caps) off of the players in the space.

The combination of these two trends should allow for a more favorable regulatory environment in the pursuit of strategic M&A in the food delivery space going forward especially as Amazon eventually reasserts itself in deliver now commerce.

There are a few requirements for those that have very high aspirations in delivery/local commerce and that hope to compete with Amazon over time.

Among them is demonstrating competency in strategic M&A. It is a must.

Another is global operations. Being great in say Poland is wonderful but if you want to go head to head with Amazon then you're going to have to expand your domain to other countries/unions.

At prices that exist in the equity marketplace right now, there are some very interesting and potentially potent combinations that make a lot of sense in global delivery.

Some of these combinations are obvious and others are not but at current values and disparities of values - yes they may change quickly - we may be in for some interesting combinations again in the delivery wars, perhaps even by fall of this year.

(eom)