Uber Woes Pit Private Equity Managers in Ride-Sharing Showdown

As Uber Technologies Inc. sees its licensed revoked in London, competition continues heating up for ride-hailing startups -- and the private equity firms that back them.

In an industry that lives and dies by its user base, London’s snub to Uber could be a boon to competitors. And big-name private equity firms that back the ride-hailing companies are watching closely.

The businesses have caught the eye of buyout firms as the asset managers expand efforts to invest in growth-stage companies. Companies such as Lyft Inc., backed by KKR & Co., and Addison Lee Ltd., owned by Carlyle Group LP, have proven business models but can use the expertise and networks of private equity investors when trying to scale.

Here’s why these private equity managers believe they’ve bet on the right horse:

KKR’s investment in Lyft

“When I think about things that the company has done to be friendly to consumers, friendly to drivers, friendly to the state and local governments in which they operate, I think you’ve seen both in consumer choice and driver choice, the strength of that brand to really make a difference,” KKR dealmaker Vincent Letteri said in a phone interview Friday.

Lyft was an early advocate of tipping options and lease programs for drivers, he said, and prioritized relationships with regulators and government entities.

“The management team of Lyft is really strong, really focused and really differentiated,” Letteri said. “A big driver of our thesis was their strength and their focus on, ‘We’re just going to do ride-sharing, we’re just going to do U.S., we’re going to focus on profitability.’ The progress they’ve made toward those objectives this year has been tremendous.”

TPG’s investments in Uber and Kakao Mobility

TPG invested in Uber in 2013 in a funding round that valued the company at $3.5 billion, a person familiar with the matter said at the time. Today, Uber’s valuation sits at about $69 billion.

The private equity firm declined to comment on its investment rationale Friday. In a June interview with Bloomberg, co-CEO Jim Coulter said the firm “has a unique position in the market, where we invest in companies that are both new and big. We need to continue that spark that is Uber but also help it transition to the global marketplace that it is and get the right management in place.”

David Trujillo, TPG’s representative on Uber’s board, last year described the company as an engineering and technology-based business to which TPG can bring longstanding relationships with regulators and the automobile industry.

“It’s been a unique way to pivot from our strengths to move into an area that -- knock on wood -- we’ve done well in so far,” Trujillo said.

In June, TPG also formed a partnership with Korean online and mobile platform operator Kakao to create a ride-services platform called Kakao Mobility.

“Kakao Mobility has an innovative business model that is set to benefit from a rapidly emerging Korean mobility industry,” TPG’s Tim Dattels said at the time. “For many years, across the firm’s platforms, we have been focused on identifying and partnering with disruptive companies similar to Kakao Mobility that are challenging, transforming and evolving existing industries.”

Carlyle’s investment in Addison Lee

Carlyle declined to comment beyond what it said in 2013, when it bought the private-hire car services company based in the U.K.

“Addison Lee is a strong business and brand with great potential,” Carlyle’s Andrew Burgess said then. “As experienced investors in the automotive and transportation sector through companies such as Applus+, Hertz and RAC, we hope Carlyle’s experience and expertise will allow us to support the plans to continue growing the business both in the U.K. and internationally and to create value.”

Addison Lee has since expanded aggressively, including in the U.S., with acquisitions of Tandem Technologies, Flyte Tyme Worldwide Transportation, Tristar Worldwide, Climate Cars Ltd. and Cyclone VIP Cars & Couriers.

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