What restaurant analysts are predicting from companies like DoorDash, Uber Eats, Toast, and McDonald
2021 was a big year for restaurants and restaurant tech, and the trends are set to continue in 2022.
The past year involved several deals in restaurants and restaurant tech. Favorable market conditions and the sheer amount of capital pouring into the industry led to increased activity. Restaurant tech has proved its value to businesses that had to dramatically adjust operations during the pandemic.
"Transactions are at an all-time high," said Cindy McLoughlin, a managing partner at the advisory firm CohnReznick. "We're probably working on more transactions right now than I think we've ever seen in the space at one given time."
A handful of restaurants hit the public market in 2021, including Portillo's, Krispy Kreme, Dutch Bros. Coffee, First Watch, and Sweetgreen. On the tech side, Toast, a point-of-sale and payments company, raised $870 million in its initial public offering in September, and the online-ordering giant Olo debuted on the New York Stock Exchange in March after 16 years in the business.
IPOs aren't the only target. Companies are lining up to take a slice of readily available capital from private equity and other investors.
McLoughlin pointed to the so-called SPAC frenzy in 2021, creating excitement around mergers, IPOs, and other major funding opportunities.
"Our pipeline of transactions that we're working on goes well into March," McLoughlin said.
Insider asked experts about the kinds of M&A activity to expect for the restaurant and restaurant-tech industries in 2022.
As clear market leaders emerge in restaurant technology, we could see the return of the acqui-hire
There's only so much tech integration that can happen.
It's common for restaurants to use many different technologies for different parts of their business — for reservations, payments, ordering, inventory, payroll, the list goes on. Some mergers and acquisitions consolidate these functionalities, tying software together for efficiency: For example, Toast acquired XtraChef in June to broaden its accounting and inventory-management capabilities.
But sometimes that integration is trickier.
"Historically there was more optimism around integration of technologies in M&A," said Brita Rosenheim, a partner at Culterra Capital and a restaurant-tech expert. "Even for the best acquisitions it's extremely challenging to truly integrate company culture, technology, customers, all that stuff."
The labor shortage is hitting restaurant-tech companies, too. Enter the acqui-hire, the practice — more common a decade ago — of acquiring companies not for their technology or the product they've built but for the team that built it.
But this could depend on how much money is in play, Rosenheim said. With all the capital flooding the market, plenty of companies are having no trouble securing funding now, even if the product might not survive in the end. "Once that capital starts to dry up," she said, "that's when we'll see this shift and dynamic."