Just-Eat Raises $64M For Acquisitions

Just-Eat, an online takeaway site, has raised $64m from private equity group Vitruvian Partners and other investors to help it gobble up smaller rivals, in Europe's largest ecommerce fundraising yet this year.

Founded in Denmark in 2000, London-based Just-Eat has established itself as an international leader in the online food-ordering market, inspiring imitators in the US and continental Europe. Its site allows people to browse a range of local restaurants and order online. Just-Eat also provides equipment for the pizza parlours, kebab shops and curry houses advertising on its site to process online orders.

According to figures from Experian Hitwise, Just-Eat's website receives more weekly visitors in the UK than Domino's or Pizza Hut. The financing, its third and largest round, is likely to value Just-Eat in the hundreds of millions of dollars, making it one of the largest private companies to emerge from London's tech start-up scene in recent years.

Alongside Vitruvian, existing backers Index Ventures, Grelock Partners and Redpoint Ventures also contributed to Just-Eat's round, with Torch Partners advising. The three venture-capital firms had previously invested £30m in March 2011, following Index's £10m injection in 2009.

Klaus Nyengaard, chief executive of Just-Eat, said he had made several acquisitions and partnerships in the past 18 months, to expand his site in France, Brazil, Canada and elsewhere.

"There are consolidation opportunities coming up here and there so it's nice to have a war chest to know for sure you can do the deal, if it's attractive," he said. "We'll definitely also keep increasing our investment in product and technology. Thirdly it makes sense to strengthen the balance sheet when you have the opportunity to get good money from good investors." Mike Risman, managing partner at Vitruvian, said Just-Eat appealed because it had the scalability of a consumer internet company with the resilience of a business-to-business concern, providing defensive growth.

"There are a limited number of later stage ecommerce opportunities but I think that is changing "these assets grow so quickly," Mr Risman said, noting that the deal demonstrated Vitruvian's willingness to do a range of deals and deal structures, from buyouts to capital investments. Just-Eat will sit alongside TV producer Tinopolis, and gambling-industry firms OpenBet and Inspired Gaming Group in Vitruvian's portfolio.

Just-Eat's revenues are expected almost to double this year. Based on second-quarter sales, the company's annual run-rate revenues are approaching £60m. It takes an approximately 11 per cent commission on all orders placed through its site, plus other fees, achieving a roughly 40 per cent pre-tax profit margin in well-developed markets such as the UK and Denmark on those commission revenues.

More than 25,000 restaurants are currently accepting orders from Just-Eat, with almost 11,000 of those in the UK, where Mr Nyengaard estimates there are about 30,000 delivery restaurants.

The takeaway market has thrived in the downturn as consumers trade down from fancier restaurants. Although Just-Eat is reliant on the restaurants themselves for the quality of the food and timely delivery, customers' reviews help to separate the wheat from the chaff.

Having initially helped restaurants move from telephone to online ordering, Just-Eat is now finding a growing portion of its transactions are done on mobiles – about 16 per cent in the UK.

Ecommerce groups have attracted strong interest from private investors in recent months. Vitruvian was vying with larger US private equity firms to invest in Just-Eat, according to one person familiar with the negotiations.

Its profitable model means an increasing number of competitors are looking to take a bite out of Just-Eat's market dominance.

A smaller German-based rival, Delivery Hero, has raised €40m in the past 18 months, acquiring businesses in Sweden, Finland, Austria and Poland.

Just-Eat has stayed out of Germany itself as cut-throat competition there descends into lawsuits. Der Spiegel reported last week that another online ordering firm, Lieferando, was taking legal action against Delivery Hero's Lieferheld for allegedly launching cyber-attacks against its site, knocking it offline. Delivery Hero's management has said the allegation is "totally absurd".

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