A Case Study on DH’s M&A of Woowa Brothers: Exit of Korean Startup by Global Funds

다국어 초록 (Multilingual Abstract)

This case study examines the corporate merger between Germany-based Delivery Hero(DH) and the South Korean startup Woowa Brothers, the largest-ever corporate merger in the history of South Korean startups. Although there exist multiple South Korean startups that attained unicorn status through investment by a foreign company, the strong national identity associated with "Minjok" (the Korean name for Nationality) generated significant criticism on the merger and acquisition(M&A) deal.
Moreover, the approval of the M&A by the Korea Fair Trade Commission(KFTC) had also attracted considerable attention, taking up to two years for approval due to concerns about potential competition restrictions and deterioration in consumer welfare. Taking into account the competitive landscape of the domestic and international food delivery app market, the global investment environment, and the regulatory environment for South Korean startups, this case study seeks to derive managerial insights for the exit strategy of future South Korean startups. Woowa Brothers had steadily grown through raising more than 500 billion KRW in investments from 2011 to 2018. However, by 2019, the influx of new competitors and intensified marketing competition in the domestic market had created significant financial burdens, and there was a growing trend of seeking returns on investments in IT startups and platforms at the global level. In 2019, the local IPO market was relatively limited, startups had lower valuations, and there were substantial restrictions on domestic corporate investments in South Korean startups by major domestic companies. As a result, South Korean startups had to rely on foreign capital.
In Woowa Brothers' case, with the need for venture capital(VC) to recover 88% of its stake, the M&A approach with DH was considered a viable exit strategy compared to an initial public offering(IPO) strategy with a stake structure comprising numerous foreign investors. Given DH's strong interest and understanding of the Asian market, this merger was deemed the best choice for all three parties: VC, Woowa Brothers, and DH.

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