Over the course of one week last month, four technology companies bought other restaurant technology companies, stirring an already active tech M&A market into a frenzy.
The sudden burst of activity was at least partly a coincidence. But it was also a sign of an acquisitive new phase for a restaurant tech industry that has been flooded with capital this year.
As of Nov. 1, restaurant tech companies had brought in more than $5 billion via fundraising, IPOs or M&A, according to a Restaurant Business analysis. Now, some companies on the receiving end of the capital are using it to buy others.
Olo, which went public in March with a $450 million IPO, has developed all of its tech in-house since its founding in 2005. But the fresh funding caused it to re-evaluate that strategy, and it made its first acquisition last month, buying Wisely for $187 million. Wisely sells customer relationship management (CRM) software and other services that Olo does not offer itself.
“As a young and newly public company, acquisition really is an avenue that is available to us practically speaking for the first time,” said Olo Chief Customer Officer Marty Hahnfeld. “It’s a luxury for a company like us to be able to look at the things you want to do and kind of consider whether there’s a way to acquire to get there faster or better than you might on your own.”
The Wisely acquisition was one of nearly 25 involving restaurant tech companies this year.
Tech M&A in 2021
About a quarter of the buyers are startups or newly public companies that used their fresh funding to go shopping—often for providers that would lengthen their list of services for restaurants.
Popmenu, which raised $65 million in June, spent some of it to acquire digital order integrator OrderNerd. The Atlanta-based online ordering company said it made the move because its restaurant partners were asking for more tools.
“The No. 1 piece of feedback is, ‘Can you just do more?’” said Popmenu CEO Brendan Sweeney. “‘Can you just put more and more in this?’”
It’s a question that was echoed at the FSTEC conference in September, where many operators lamented the fragmented and complicated state of restaurant technology. Suppliers consolidating into “all-in-one” systems is one solution.
“Having more of that omnibus type of approach makes it easier for operators on many levels,” said Technomic Principal Melissa Wilson. “They then don’t have to navigate which of those systems integrate with each other, they have fewer vendors to deal with, and there’s more built-in training.”
“Because customers are sending those signals, I think you’ll see continued consolidation,” Hahnfeld agreed.
“I think there’s still plenty of room for startups to innovate in the restaurant technology sector. … That trend can sit alongside the consolidation trend.” —Aman Narang, Toast
But experts emphasized that the trend toward consolidation doesn’t mean restaurants will have less choice when investing in technology.
“The technology integration in the industry is still relatively recent, and there are a lot of players,” Wilson said.
Because it’s such a hot market, it’s growing, and even attracting companies from outside the industry. IBM last week acquired McDonald’s technology arm, McD Labs, for instance. Squarespace, Fiserv and Oracle, none of which are strictly foodservice-related, have all bought restaurant technology providers this year.
“You’ll continue to see new players coming in,” Wilson said.
It’s counterintuitive, but more consolidation might actually give restaurants more choice: The savvier operators might decide to build their tech stacks from a variety of providers, while those with fewer resources can choose a company that offers multiple services in one box.
“Tech has always gone through this cycle—it goes from all-in-one on one axis to fragment everything and buy best of breed on another axis,” Hahnfeld said. “This is a unique space in time where both of those things can be true at the same time, and it’s not typically been the case.”
In Olo’s case, for example, the acquisition of Wisely doesn’t prevent its restaurant customers from opting to use one of the many other CRM providers that integrate with Olo.
“In the olden days, [acquiring Wisely] would send the message that we’re no longer interested in being a great partner to those companies, when in reality, now that’s not our intention even a little bit,” Hahnfeld said.
And while consolidation may be a sign that restaurant technology is maturing, the industry is still in the early stages of adoption compared to its counterparts in retail and travel.
“I think there’s still plenty of room for startups to innovate in the restaurant technology sector,” said Aman Narang, co-founder and COO of Toast, which went public in September and has made several acquisitions in its lifetime. “That trend can sit alongside the consolidation trend.”