Quora Question: Would Any Company Buy Lyft?

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Answer from Jonathan Brodsky, SVP of Chicken Soup for the Soul:

I don't think that there's enough value in Lyft, a loss-making, multi-billion-dollar valuation company, for anyone to want to buy it, especially for many billions.

Here are a few issues Lyft has:

1. It isn't the majority service anywhere it operates in the U.S.
2. Lyft drivers make less when they drive for Lyft vs. Uber in most cities.
3. Lyft has a massive cash disadvantage in comparison to Uber, which means any acquirer needs to have an awful lot of liquid cash on hand to try and compete head-to-head.

If you combine these things, it's pretty easy to picture a future where VC money for Lyft dries up, they can't compete, and they go to zero. They barely even have assets that are worth acquiring; they have drivers and apps, and the drivers will leave en masse if Uber is the only game in town.

The number of companies out there that can even afford to spend $5 billion to $6 billion on Lyft and then another $3 billion to $5 billion just to keep up with Uber is a tiny list, and it can't be clear to any of those companies what advantage they'd get from buying Lyft. Here are a few of the likely places a buyer might come from:

1. A car company, which would presumably be able to use Lyft to source lots of car sales and leases. But, well, you still need Lyft to make money to make that strategy make any sense at all, and they don't. Turning down GM seems to me to be a major strategic mistake at any valuation.
2. A big tech company, such as Alphabet or Apple. That would turn their basic business models on its head—software (and even hardware, to an extent) is about scaling up a process and selling the same thing over and over and over. A ride share is not the same thing over and over and over. There are variables that can't be engineered out, like whether that driver is hungover or drunk. It's a business that is limited by the number of people you have working for you, which is a severe limitation in comparison to a more traditional tech business.
3. Finally, other ride share companies can do the same math I did above, and then it simply becomes a question of what their recruiting expense to get Lyft's drivers to move over would be. That's not going to be billions of dollars.

So I don't think any company is going to get value out of buying Lyft, and I think that the likely outcome for it is a sale for parts somewhere down the line (unless they can figure out a way to really start dominating a few markets, in which case there begins to be a case for a few people to buy them).

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