Uber Shuts Down Drizly. Where Was M&A Due Diligence?
What was the strategic rationale for the deal and where was M&A due diligence?
I am not sure why Uber acquired Boston-based alcohol delivery service Drizly back in 2021 for $1.1 billion other than to perhaps goose revenue growth. Now, Uber is apparently shutting Drizly down. Drizly’s delivery service had little in common with Uber’s core ride share business. It is not as though the Drizly acquisition helped Uber create a network effect for its core ride share business, nor did it help the core business achieve economies of scale, nor grow EBITDA. In fact, Drizly was dilutive from a financial standpoint as well as a liability standpoint.
Drizly’s 2020 customer database hack exposed PII data of approximately 2.5 million customers. The hack was the result of a known security flaw that remained unresolved for two years. The FTC’s action against Drizly (below) limits the amount of customer data Drizly may collect and therefore limits Drizly’s value to Uber.
It is not clear why Uber would have pursued closing the acquisition given that the FTC review was in-process. Consider it poor M&A due diligence on the part of Uber CEO Dara Khosrowshahi and his Corp Dev team. Khosrowshahi is a Finance guy who learned under Barry Diller, he’s not a Strategy guy nor does he value deal due diligence.
Frankly, I was never a fan of Drizly as it competed with its retail customers, disintermediating them from their end-customers.
As far as Drizly’s 2020 customer database hack, it was hardly a surprise. Venture owners care almost zero about their portfolio companies building out a proper infrastructure to support growth. Instead, 100% of the focus is on Revenue growth at the expense of everything else at most Venture firms.
The FTC’s action against Drizly (HERE).