With Dealmaker In CEO Seat at Uber, Should M&A Lawyers Brace Themselves?
Uber Technologies Inc.'s new CEO Dara Khosrowshahi hasn't even officially started with the ride-hailing company yet, but he's already announced…
September 01, 2017 at 07:00 PM
5 minute read
The original version of this story was published on Law.com
Uber Technologies Inc.'s new CEO Dara Khosrowshahi hasn't even officially started with the ride-hailing company yet, but he's already announced a timeline for an initial public offering, a sure indication that he is likely carefully weighing other major business moves—big transactions, possibly among them.
“He's a world-class CEO and a savvy dealmaker,” said Wachtell, Lipton, Rosen & Katz corporate partner Andrew Nussbaum, who, in 2015, represented Khosrowshahi's former company, Expedia Inc., in its purchase of online travel company Orbitz Worldwide Inc. for $1.6 billion.
Nussbaum, who said he's worked with Khosrowshahi “for many years on a wide variety of transactions,” isn't alone. Others who have interacted with the former Expedia CEO, who joined the travel booking giant in 2005, are quick to describe him as a leader who likes to seize deal-making opportunities. So, should Uber's in-house counsel be bracing themselves for more mergers and acquisitions coming down the pipeline?
Historically, San Francisco-based Uber hasn't exactly been known for its M&A activity. In fact, in a July 27 deposition, former CEO Travis Kalanick talked about what a rarity it was for the company to acquire autonomous transportation startup Otto—a transaction that has since led to a legal battle. When Kalanick was being deposed, he was direct, saying: “we haven't done a lot of M&A transactions at Uber.”
News outlets reported in June that the ride-hailing company was in talks to acquire valet startup Luxe, but the deal has yet to materialize. Uber's other acquisition targets have included artificial intelligence startup Geometric Intelligence, social product studio Swipe Labs and mapping technology company deCarta.
Comparatively, Expedia spent several billions of dollars making deal after deal in recent years.
Jared Sine, a former M&A attorney with Expedia, described Khosrowshahi as “very engaged” with his lawyers, particularly those involved in mergers and acquisitions.
Sine, who was named general counsel of Match Group last year, was heavily involved in some of Expedia's major deals such as its $1.6 billion acquisition of Orbitz and the $3.9 billion purchase of vacation rentals website HomeAway.com Inc.
In 2005, Expedia spun off from IAC, which owns the Match Group. “Opportunistic M&A has been a hallmark of all Barry Diller companies, from IAC to Match Group and Expedia is no exception,” Sine said. Diller is the chairman and senior executive of IAC and of Expedia.
“All of this was done with Dara at the helm, and I can't imagine a world where he is not pushing for smart and opportunistic M&A,” Sine said. “He's not going to push for acquisitions just for the sake of doing M&A, but I see him smartly acquiring and investing as it makes strategic sense for Uber.”
Weil, Gotshal & Manges corporate partner Craig Adas said, “It's probably safe to assume that [Khosrowshahi] and the Uber board had a thorough discussion about the company's strategy, and how M&A fits into that strategy, before [Khosrowshahi] accepted the CEO position.”
He said, though, that if Khosrowshahi wants to turn Uber into a serial acquirer, it won't happen overnight. It would probably be “a few months” before Khosrowshahi pushes for the first acquisitions, if he pushes for any at all, Adas added.
To support those new deals, Adas said Uber could likely rely on outside counsel at first. Selecting those outside laywers could be a comprehensive process, with evaluations from Khosrowshahi himself, the board of directors, the yet-to-be-named incoming GC and also other members of the in-house team, Adas said.
Focusing inwards, one M&A attorney, who declined to be identified by name because his firm represents the ride-sharing company on unrelated matters, said Uber needs to find professionals who can help on the back end of M&A deals, supporting Uber in the integration of purchased companies into its workforce. That includes hiring both someone responsible for corporate development, the attorney said, and an in-house lawyer with similar responsibilities.
“If you're going from a company that is not doing deals to a company that is doing [them], you need a person in the corporate development function who can work with all aspects of the company, including legal, finance, customer-facing sales and marketing teams, the engineering team, and, depending on why you're buying a business—for instance, like an acqui[sition]-hire—human resources, too,” the M&A attorney said.
Finding an in-house lawyer who also has that skillset isn't easy, the attorney said, and Uber can't rely on simply hiring one hot-shot lawyer and expect immediate results. This isn't like an NBA team buying talent to win a championship. This is more like trying to find and sign Cleveland Cavaliers superstar LeBron James, said the attorney.
“LeBron is a great player, but he also makes everybody else better because he knows where everybody fits and his basketball smarts are off the charts,” the attorney said. “The corporate development person needs to be that person, and the lawyer needs to be that person, as well.”
Jennifer Williams-Alvarez contributed to this report.
Stephanie Forshee can be contacted at [email protected].
David Ruiz can be contacted at [email protected].
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