Coverage: Lyft hires investment bankers Qatalyst

Ride-sharing service Lyft Inc. has hired investment bank Qatalyst Partners LP to help it explore alternatives, including a sale of the company.

Douglas MacMillan of The Wall Street Journal has the news:

Frank Quattrone, the founder and executive chairman of Qatalyst, has contacted companies including large auto makers about acquiring a stake in Lyft, the people said. It isn’t clear whether Lyft is aiming to sell itself or raise new funding.

Lyft, the largest U.S. rival to Uber Technologies Inc., has tried to keep up with its larger competitor as both companies burn through capital to expand their ride-hailing services. The two San Francisco companies pour millions of dollars into subsidizing low-price rides and giving cash bonuses to new drivers, and both Uber and Lyft have said such spending has put them on a path to profitability.

Lyft has raised about $2 billion in funding, or less than one-sixth the total funds raised by Uber. Lyft was last valued at $5.5 billion by investors including auto maker General Motors Co.
Hiring Qatalyst, one of the most active Silicon Valley deal makers, may signal Lyft is open to a sale. Qatalyst ranks fourth this year among banks advising on U.S. acquisitions, working on deals totaling $33.7 billion, according to data provider Dealogic. Those deals include a coveted role advising LinkedIn Corp. on its $26 billion sale to Microsoft Corp., announced two weeks ago.

Ken Yeung of VentureBeat.com notes that General Motors may be a buyer:

In an effort to counter the growing influence of Uber, Lyft has formed an ridesharing alliance with other companies — kind of like a “the enemy of my enemy” situation. Last September, the company struck an accord with China’s Didi which has recently received backing from Apple, and also with GrabTaxi and Ola.

Some of the Lyft’s investors include a bevy of who’s who in the investment world, including Icahn Enterprises, Rakuten, Andreessen Horowitz, Founders Fund, Mayfield Fund, K9 Ventures, fbFund, and even General Motors which put in $500 million of a $1 billion round into the company.

What may be appealing to large auto makers is technology around self-driving cars that Lyft and may of these ridesharing services are working on. This is why General Motors made its investment according to its president Dan Ammann: “With GM and Lyft working together, we believe we can successfully implement this vision [of creating an integrated network of on-demand autonomous vehicles] more rapidly.”

If we had to think about acquisitions, it’s quite likely that General Motors could be one of the leading contenders to snatch up the company.

Brian Solomon of Forbes looks at other potential acquirers:

Another Car Manufacturer: It wouldn’t be crazy for another automaker to want to get involved in ridesharing. Volkswagen, Toyota, and Fiat Chrysler have all made investments similar to GM. A company like Ford doesn’t want to end up with no chair at the table. But with GM already the exclusive-ish partner for Lyft, why would the startup be attractive to a competitor?

Didi Chuxing: If you’re looking for other natural partners, the $7.3 billion-richer Chinese ridesharing company has to be included. They have the money to buy Lyft and are fighting a common enemy in Uber. Didi and Lyft have a partnership on cross-border travel already, but combined they might be able to coordinate more closely and match Uber’s firepower. And yet, why would Didi buy Lyft when it can invest and partner instead? It needs its recent cash grab to fight Uber at home, so extending to the United States, where Lyft remains in a distant second place, seems like an overreach.

Softbank, Alibaba, Rakuten, or Tencent: We’ve reached the speculative foreign investor part of the evening. The first three companies have already invested in Lyft’s previous funding rounds. Tencent is a Didi investor and is in a buying mood, snapping up mobile games company Supercell for about $9 billion. That move, coincidentally, put $9 billion back in Masayoshi Son’s coffers at Softbank. Still, none of these names make much strategic sense. They’re better investors than they are acquirers.