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Banker Qatalyst Partners has begun contacting auto makers about a deal

By Douglas MacMillan 

Ride-hailing startup Lyft Inc. hired Qatalyst Partners LP, the boutique investment bank best known for helping tech companies find a buyer, according to people familiar with the matter.

Frank Quattrone, the founder and executive chairman of Qatalyst, has contacted companies including large auto makers about acquiring a stake in Lyft, the people said. It isn't clear whether Lyft is aiming to sell itself or raise new funding.

Lyft, the largest U.S. rival to Uber Technologies Inc., has tried to keep up with its larger competitor as both companies burn through capital to expand their ride-hailing services. The two San Francisco companies pour millions of dollars into subsidizing low-price rides and giving cash bonuses to new drivers, and both Uber and Lyft have said such spending has put them on a path to profitability.

Lyft has raised about $2 billion in funding, or less than one-sixth the total funds raised by Uber. Lyft was last valued at $5.5 billion by investors including auto maker General Motors Co.

Hiring Qatalyst, one of the most active Silicon Valley deal makers, may signal Lyft is open to a sale. Qatalyst ranks fourth this year among banks advising on U.S. acquisitions, working on deals totaling $33.7 billion, according to data provider Dealogic. Those deals include a coveted role advising LinkedIn Corp. on its $26 billion sale to Microsoft Corp., announced two weeks ago.

One potential buyer may be General Motors, which paid $500 million for a 10% stake in Lyft earlier this year and indicated that the ride-hailing service could be crucial to the future of automobiles. The two companies have since agreed to develop self-driving cars and to offer deals on rental cars to Lyft drivers.

Technology M&A may be due for an uptick this year, as highly valued startups find it more difficult to raise funds from venture capitalists. Marc Andreessen, whose firm Andreessen Horowitz is an investor in Lyft, said at the Bloomberg Technology Conference earlier this month that more firms are considering or negotiating a merger than any time in the past four years.

So far this year, there have been at least $260 billion of tech deals announced globally, according to Dealogic data. That is the second-fastest pace ever for the period, after 2000. Technology is the busiest sector for M&A this year, as it was in 2015, the data show.

The growing popularity of ride-hailing has attracted several of the biggest auto makers and tech companies. In May alone, Apple Inc. said it invested $1 billion in Chinese startup Didi Chuxing; Volkswagen AG bet $300 million on Israeli company Gett; and Toyota Motor Corp. made an investment in Uber. Alphabet Inc., a leader in self-driving cars, is testing its own carpooling service with its employees in San Francisco.

Lyft has in recent months joined with Didi Chuxing and two other Asian ride-hailing services in an effort to help each other compete with Uber in their respective countries. Both companies share a common investor in Chinese internet company Alibaba Group Holding Ltd.

Mr. Quattrone, one of the prominent IPO bankers during the dot-com boom, started San Francisco-based Qatalyst in 2008. In January, Mr. Quattrone stepped down from his role as chief executive, handing that title to his longtime partner, George Boutros.

--Maureen Farrell and Gautham Nagesh contributed to this article.

Write to Douglas MacMillan at douglas.macmillan@wsj.com

(END) Dow Jones Newswires

June 28, 2016 02:48 ET (06:48 GMT)

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