Introduction
Concerning Delivering Hero.
When it comes to online marketplaces for ordering and delivering food, Delivery Hero is among the most well-known and successful ones functioning on a worldwide basis. For 34 out of 41 countries in Europe, the Middle East and North Africa (MENA), Latin America, and Asia-Pacific, the firm is the undisputed market leader in terms of restaurants, customers, and orders placed online and through mobile devices. The term “MENA” is an abbreviation for “Middle East and North Africa.” Delivery Hero also has its own delivery service, which serves more than 400 locations worldwide. More than 22,000 people are employed by the company, which has its headquarters in Berlin, Germany. (Basich , 2016)
Concerning Woowa
Under the Woowa-managed brand name “Baedal Minjok,” the company provides South Korea’s most popular online meal-delivery platform. The company owns Baedal Minjok. With a number of cutting-edge inventions at its disposal, including a crowd-sourcing rider system, robotics technology, and virtual kitchens, Woowa is always working to expand the food technology industry. Woowa has just announced the launch of a convenient grocery delivery service under the name “B Mart.” Delivery of goods is guaranteed to take less than 30 minutes with this service. More than 8 million people use Woowa every month, and the platform is projected to process transactions with a gross merchandise value (GMV) of more than KRW 8 trillion in 2018. Woowa was founded in 2010. More than 8 million people use Woowa each month since the app’s release in 2010. (Staff, 2018)
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1. With reference to the academic literature and using various units of analysis (global, national, industry) of external environmental factors, suggest the most important external issues driving the acquisition of Woowa by Delivery Hero.
The ambition of Delivery Hero to strengthen its foothold in the Asian market was the primary impetus behind the acquisition. The transaction will result in the establishment of Woowa DH Asia in Singapore and the purchase of a majority stake (88%) in Woowa Brothers.
By using the Food panda name, Delivery Hero is able to provide its services to a total of 12 Asian countries, some of which include Bangladesh, Cambodia, Hong Kong, and Japan. The firm has been bought by Woowa DH Asia, which will now be responsible for managing the company’s overseas activities in Japan and Vietnam. Additionally, according to the FTC, DH is considering purchasing Woowa Brothers in order to increase the quality of its own services by capitalizing on the logistical skills and marketing capacity of Woowa Brothers. This information comes from DH’s interest in acquiring Woowa Brothers. Woowahan Youths, a division of Woowa Brothers, is in charge of running the delivery company known as Baemin Riders.
The following are some highlights of the transaction:
When all of the routine adjustments are taken into account, the total business value of the Transaction comes to $4 billion (or €3.6 billion)
Delivery Hero will eventually acquire full control of Woowa in exchange for the 20-day VWAP of € 47.47.2 in cash and approximately € 1.9 billion in shares. This transaction will take place over the course of time.
The volume weighted average price (VWAP) for the last 20 days is € 47.47; thus, the maximum number of shares that Delivery Hero might issue is 40.1 million. Following the completion of the Transaction, this would amount to approximately 17.5% of the total outstanding shares of Delivery Hero. There will be an initial delivery of about 31.2 million shares, and successive deliveries over the next four years will total approximately 8.9 million shares. The first delivery will be made all at once.
The share component is subject to additional downside protections in addition to the standard anti-dilution and other precautions. The financial shareholders will receive a minimum guaranteed share price protection on the portion of the consideration that is settled in shares at the closing, and the management shareholders will receive a portion of the consideration that is settled in shares over the course of two to four years after the closing that is subject to a full guaranteed share price protection and would be settled in cash. The financial shareholders will also receive a minimum guaranteed share price protection on the portion of the consideration that is settled in shares at the closing.
The cash consideration will be financed through a combination of shares, loans, and equity-linked instruments.
The Joint Venture views the Korean market as a significant objective, which is why it intends to invest there in order to develop new technologies and enhance the number of product varieties available. After the transaction is completed, the Korean versions of Delivery Hero will both maintain their own unique identities and continue to operate freely inside the Korean market even after the sale has been finalized.
Delivery Hero has committed US$50 million to a technology fund that aims to foster innovation in Korea and the rest of Asia. The fund’s primary objective is to facilitate the development and expansion of cutting-edge online food delivery services for the benefit of customers, businesses, and drivers.
2.Conduct internal analysis utilising relevant academic literature and discuss the areas of expected internal benefits and synergies for both companies.
Internal analysis of Woowa
Strengths
Robust Distribution System Benefits
For restaurants and motels that specialize in supplying a certain cuisine or beverage, chains and networks of hotels are typical. There are several companies that engage in global competition. However, they have a great distribution network, so their products may reach customers anywhere in the glob (Staff, 2018)
Vendor Relations
Woowa that produce food and beverages develop strong relationships with their suppliers over time. Actually, it offers the same things consistently and lasts for a long-time year even.
Weakness
less R&D expenditures
Woowa researches and development often lacks a designated funding. The same meal is prepared by the chef and his or her team of chefs each time. Everyone may agree that consumers rapidly become tired of the same tastes.
The cost of goods in stock
There should be little time between harvest, preparation, and consumption.
Opportunities
Technological initiatives to save costs
Efficiency would be significantly increased if the Woowa used a digital recording system, smart kitchen equipment, and an electronic ordering and payment platform. After that, the whole business would function smoothly, with no delays caused by unforeseen costs and no mishaps due to sloppy kitchen cleanliness.
More stable financial situation
The recent increase in middle-class income may be attributed to wage regulations. When Woowa have some extra money, they tend to spend it at expensive restaurants.
The world’s population has been increasing throughout time. Despite its many disadvantages, the food and beverage industry may profit from it. More people imply more money in the economy since there are more mouths to feed and thus more potential consumers
Threats
Competition
Technology improvements and the rise of online shopping have made it much easier to enter this industry. As a result, there is fierce rivalry in the Woowa. The same things may now be ordered by customers with a range of alternatives. The same product is sold by many businesses.
PESTLE Analysis
Political
Institutionalized World Government
Complex international systems of food safety laws are in place in every country. The minimum age for employees, the ideal temperature range for storing and transporting food, and the standard intervals between inspections of commercial kitchens all fall under this category of rules. Without a shadow of a doubt, the woowa is currently one of the most highly regulated in the whole economy. Customers are protected against poor nutrition, but the food industry’s bottom line takes a hit due to the burdens of regulation.
Economic
Higher Rates of Consumer Expenditure
The rising line indicates that the standard of living of people throughout the world is improving. That means more individuals from different income brackets may afford to go out to nice restaurants and treat themselves. People are dining out more and cooking at home less, leading to rising earnings in the food service industry as a whole. This is fantastic news for the restaurant industry, the food distribution industry, and the people who buy their products.
Social cultural
worriedness about one’s health
A lot of progress has been made in scientific knowledge of the relationship between diet and health. The public is becoming more aware of the connection between what they put in their bodies and how they feel. As a result, many individuals are exploring other ways to fuel their bodies. This might be good or bad for the food industry, but it does mean that established businesses will have to adapt. A good example would be fast food businesses switching up their often fried menu items in Woowa for healthier alternatives like salads and soups.
Technological
Automation
More and more kinds of automation are being put to use in the food industry. As more efficient technology solutions Woowa , such as the use of robots, are created, fewer people will be needed to work in the food industry. This improvement is good for the industry as a whole since it reduces the likelihood of human error while increasing earnings for businesses.
Legal
In particular, Woowa has its own set of rules for the transport, storage, and preparation of food, including maximum and lowest temperatures for certain foods, how they should be cleaned, and so on. Legal issues arise whenever these norms are broken, regardless of how much political influence they may have. It is essential for anyone working in the food sector to take every precaution to avoid breaking these rules, since doing so might result in costly lawsuits from dissatisfied consumers.
Environmental
The Consequences of Eating Meat
The environmental and health implications of the foods we eat are increasingly coming to the forefront of people’s minds. Similarly, enormous swaths of land have been cleared by the meat industry for agricultural purposes. That’s why more and more people are switching to plant-based diets, and that’s why governments are taking note. While this is not always a terrible thing, it does mean that the food business will need to prepare for the future.
Delivery Hero
SWOT Analysis
Strengths
The firm’s strengths lie in the assets and competencies it has, which it may employ to create, expand, and safeguard a market advantage. Customers in the computer services sector are already familiar with the Delivery brand. This has allowed the business to increase its prices relative to its rivals in the computer services market.
Weakness
Restrictions on Shipping It’s possible that the hero is the lack of necessary abilities or resources that the group now lacks. Leaders need to figure out whether the weakness is the product of poor decision-making or a lack of foresight.
Market niches and regional monopolies that firms like Delivery Hero might potentially exploit are dwindling. Deliveries via the client network that Delivery Hero has established are not as efficient as they once were.
Opportunities
The tastes of consumers are always evolving. Consumers are becoming more open to trying new items on the market as a result of increased disposable incomes, easy access to information, and rapid adoption of technology goods. Delivery Hero has to keep tabs on the computer services business and the broader technology industry.
With its brands already well-known in the premium market and its customers having had positive experiences with them in the lower sector, Delivery Hero has a lot of potential thanks to the trend of consumers shifting to higher-end items. It has the potential to benefit the firm and provide a path toward greater profits.
An improving economy and cheaper interest rates for loans mean a win for Delivery Hero’s clients. This means there will be an increase in sales for Delivery Hero.
A rise in the number of clients from less affluent socioeconomic brackets as consumers shift their spending from shady operators to legitimate internet companies. Delivery Hero will be able to break into the low-end of the market if they can provide a basic service.
Threats
Dangers are anything that might put an organization’s business model at risk, such as shifting customer preferences or a weakening of the macroeconomy. Although threats cannot be eliminated, they may be contained
Delivery Hero and other market competitors face increasing competition due to the increasing commoditization of items in the technology sector.
PESTLE Analysis
Political
One of the political factors that might affect Delivery Hero’s success is the chance of war. The economic damage caused by military tactics, terrorist threats, or other political upheaval is not now a danger to Germany. Delivery Hero has prior experience operating under trying conditions.
New laws are enacted during a new administration. After the next election, Germany’s government may change if present trends continue. Delivery Hero has to be ready for a shift in how the priorities of the technology industry are governed. (Basich , 2016)
Economic
Because of government spending, continuous demand due to disposable income, and growing investment in new sectors
The strong financial markets and readily available money in the German stock market place Delivery Hero in a prime position for ongoing worldwide growth.
Delivery Hero’s long-term investment goals may be immediately impacted by the volatility of the German currency.
Social Cultural
Germany has unique social conventions and a different social structure than the United States, where Delivery Hero is headquartered. To better serve its German consumers, it should invest money in hiring locals who are familiar with the nation’s customs and culture.
Demographics are on the side of Delivery Hero when it comes to the sales of tech-related goods. Germany is still a developing nation. Using this trend to their advantage, Delivery Hero may be able to reach more customers.
Technology
Delivery Hero’s rivals may take use of recent technological developments to provide insightful data about their strategies and perspectives on the administration of Computer Services’ business model.
More firms will invest in R&D if intellectual property rights (IPR) and other forms of intellectual property rights are effectively protected in Germany.
Environment
Recycling is quickly becoming the standard in the German economy rather than just a good habit. The demands put forward by the technology industry must be met by Logistics Hero.
The continuing monitoring of environmental regulators is another factor that is raising the cost of doing business for Delivery Hero.
Law
Modifications needed for Delivery Hero to adhere to German health and safety regulations (along with an estimate of the associated costs).
Even if some nations adhere to international law, it can take years for a business dispute to be resolved in such nations. Before going worldwide, Delivery Hero must ascertain the typical timing of various events.
3.With reference to the academic literature, explain the risks associated with this choice of acquisition. Discuss the potential managerial challenges in terms of post-acquisition integration.
Delivery Hero has reinforced its commitment to expanding into Asia’s rapidly increasing markets as a result of this purchase, and the company has established its position as the largest global food delivery platform outside of China based on the volume of orders. (Laive, 2014)
This statistic was derived from an analysis of Woowa’s sales data. Woowa’s sales in Korea increased by 96% year-on-year, hitting € 242 million, and the company’s gross merchandise volume (GMV) for the fiscal year that ended on December 31, 2018, exceeded € 4.0 billion. Additionally, the company was successful in producing an EBITDA of € 46 million via its operations. The total amount of gross merchandise volume (GMV) that Woowa was able to achieve in Korea was € 4.6 billion, and the company was able to raise its sales in Korea by 84% year-over-year, reaching a total of € 301 million. In total, the amount of GMV that Woowa was able to achieve in Korea was € 4.6 billion. (Wowwa, 2021). In addition, the company was able to achieve its goal of creating an EBITDA of around 3 million euros successfully. In addition to this, Woowa has a company that is situated in Vietnam, and during the third quarter of 2019, this Vietnam-based company was responsible for the completion of nearly 1.5 million orders.
The establishment of a joint venture in Singapore under the management of Woowa would be carried out as a part of the transaction that would be carried out
The total enterprise value of the Transaction is estimated to be $4.0 billion (or €3.6 billion), and this is before special adjustments are taken into consideration. This estimate of value is predicated on the assumption that there is no cash nor debt that is due. It is anticipated that Delivery Hero will eventually acquire full ownership of Woowa for a total payment of approximately US$ 1.7 billion in cash and € 1.9 billion in shares. This expectation is based on a volume weighted average price (VWAP) of € 47.47.2, which has been calculated over a period of 20 days. This estimate is based on the fact that the VWAP for the previous 20 days was € 47.47.2, which When the Transaction is successfully completed, Delivery Hero will have ownership of up to 88 percent of the share capital of Woowa. This will take place at the period specified in the previous sentence. The remaining 12% of the share capital will be retained by Woowa management, and over the course of a period of four years, it will be converted into Delivery Hero shares so that Delivery Hero may gain complete control of the company. (Wowwa, 2021)
The current authorization at Delivery Hero permits the company to issue up to 40.1 million more shares if they so choose. In the event that the transaction is successfully completed, this quantity of shares would represent approximately 17.5% of Delivery Hero’s total number of shares that are now outstanding. (Laive, 2014). It is anticipated that the Transaction will be finalized in the second half of 2020; however, its completion is dependent on a number of variables, such as the receipt of cash and permission from regulatory authorities. It is expected that the Transaction will be finalized in the second half of 2020. (Basich , 2016)
4.Drawing upon academic literature and theory, critically discuss the possible effects, both positive and negative, of the acquisition on the domestic retail market in South Korea
Advantages
Mergers and acquisitions (M&A) allow companies to rapidly grow into new markets and product lines while gaining access to an established brand name with a proven track record and loyal consumer base. Acquiring a company that already has a foothold in the industry might help you break past barriers that have proven tough to overcome. (Alex, 2022)
Market share in Woowa may be rapidly expanded via the utilization of acquisitions. Mergers and acquisitions may help a company grow and gain a competitive edge in a sector where competition might be fierce. The process may lead to market synergies.
Woowa may expand its skills and access to resources by purchasing other businesses in south Korea . There are several potential benefits to doing this, including accelerating the rate at which revenues are growing and strengthening the company’s long-term financial position, both of which make it easier to get funding for growth initiatives. Expanding and diversifying a business’s operations may increase its resilience in the face of economic uncertainty.
When smaller businesses join forces with larger corporations, they have access to more personnel and expertise in areas such as finance, legal, and human resources.
Obtaining Funding
When a Woowa is established by an acquisition, that company has more cash on hand. The inability to get large loans forces many small company owners to invest their own money in the growth of their firms. On the other side, an acquisition might open up access to a greater amount of finance. The company’s founders may thereby get the required funding without having to dip into their own personal resources.
Disadvantages
Divergences
A company’s culture frequently develops over time. Buying a company with an incompatible culture might generate complications. The combined labor and management may not blend well. Employees may reject the change, causing resentment and worry.
Unique
Mergers and acquisitions might eliminate employment. When two organizations with similar aims unite, divisions or workers may overlap. This might boost wage costs. Restructuring and layoffs are regular M&A results to increase productivity. Layoffs diminish morale and workplace productivity.
Competing objective
The two businesses may have different agendas after operating separately. The acquiring business may desire to cut costs while the original firm wants to expand. Internal backlash against the transaction may stall proceedings.
Companies mismatched
A firm that doesn’t contact specialists before buying might end up with more difficulties than answers. This may prohibit a successful company from growing.
5.By using evidence from your research, discuss the possible effects of the digital disruption that has contributed to the acquisition. Speculate on the impact of digital disruption on this ‘acquisition’ of Woowa by Delivery Hero.
According to the Korea Herald, the proposed merger between Delivery Hero, headquartered in Berlin, Germany, and Woowa Brothers, headquartered in South Korea, which would have an estimated value of $4 billion, faces regulatory challenges related to antitrust concerns. If the merger were to take place, the combined company would have an even greater market share in both countries. In the event that the merger went forward, there is a possibility that it would lessen the amount of competition in both of the markets. Some members of the South Korean parliament have gone so far as to suggest that the agreement be scrapped on the grounds that it prevents healthy levels of competition from existing in the market. The rationale behind this suggestion is that the agreement prevents healthy levels of competition from existing. (Lunden, 2016)
Following the successful conclusion of the merger, Delivery Hero would own an ownership position in Woowa equal to 87 percent, and the combined client bases of the two companies would comprise 98.7 percent of the whole market for restaurant meal delivery in South Korea. Concerns abound, which is to be expected given the rapid expansion of the market for meal delivery in South Korea. These concerns center on the impact that increased market share would have on the level of competition that exists in the market, and this expansion of the market for meal delivery in South Korea is the impetus for the rapid growth of the market.
It should be noted that Delivery Hero is not the only company dealing with this issue. Similar challenges have been encountered by other businesses. Since Amazon’s engagement with Deliveroo began well over a year ago, there have been lingering questions over the degree to which the corporation complies with antitrust rules. The effects of the pandemic on the restaurant industry had a positive trickle-down impact on Deliveroo’s operations, which in turn had a positive effect on Deliveroo’s business. This was a win-win situation for everyone involved. This played an extremely significant part in the conclusion of the deal going down without a hitch. On the other hand, in contrast to Amazon’s practice, the clearing process for this business transaction was carried out in a substantially shorter amount of time. The proposed merger of Takeaway.com and Just Eat, on the other hand, was met with regulatory opposition on a level with that of the previous example. It is highly likely that concerns regarding Uber Eats’ ability to comply with various regulations was one of the primary factors that led to the company’s decision in the summer of 2018 to abandon its intentions to acquire Grub hub.
Delivery Hero has been quite explicit about its intention to compete against the criteria that the KFTC has set. The news agency Reuters reports that the service would “resist” the notion, while the business views it as “a starting point for talks. In spite of this, it will almost certainly make the overall amount of time necessary to close the sale even longer.
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