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eCommerce M&A Multiples Update Q2/2022

Updated: Aug 23, 2022

For anyone involved in eCommerce, the last few months have definitely been a turbulent time. In our previous professional work, we analysed a variety of industries and took a close look at their historical development. It is rare for an industry that has experienced so much tailwind over the years to encounter so much headwind within a few months.

Turbulences in the eCommerce Market

The perceived disappearance of Covid-19 has increasingly shifted many people's lives outside, leading to a general decline in demand for products on the one hand and a shift in sales to offline retail on the other. With the start of the war in Ukraine and steadily rising inflation, the public's appetite for consumption has been further curbed. In addition, skyrocketing global manufacturing and delivery prices drove up costs for eCommerce companies significantly, while Amazon also blithely jacked up its fees. We've spoken to entrepreneurs who are seeing margin drops of up to 20 percentage points and, in the worst-case scenario, even losing money at times.

Some aggregators who were already struggling with integration and operations of acquired brands in Q1 2022 were hit even harder by the trends explained above. For example, brands that were still exceptionally profitable and growing strongly at the time of acquisition could quickly surprise negatively. At the same time, the expectation of higher interest rates meant that buying and managing brands became much more expensive for aggregators who were often heavily debt financed. Accordingly, many buyers are now acting cautiously and selectively. The consequence: on average, significantly fewer acquisitions at lower multiples!

eCommerce Markt Outlook

There is no doubt that the eCommerce industry is going through a difficult phase. Nevertheless, or precisely because of this, it is important for us to take a look into the future.

Some of the changes mentioned will probably remain in the long term (high energy and production costs, increased interest rates, inflation), while other problems will most likely weaken (exorbitant delivery costs and supply chain issues). Our assessment is therefore that we are currently going through a valley of tears, which may also last for a while and in which there will definitely be consolidation effects. Nevertheless, we are convinced that the eCommerce industry will return to its growth path (e.g. offline to online push, among others due to demographic change). Entrepreneurs who make consumers' lives easier and more beautiful with their strong brands will gain market share in this phase and emerge stronger from the crisis.

In our opinion, the study by Morgan Stanley is worth recommending. While the growth of online commerce in the coming years was partially anticipated by the Covid-19 crisis, we are certain: online commerce is here to stay. The shift from offline to online will continue, especially as society becomes more online-savvy. We are excited to see how eCommerce will change in the coming years - also due to technological innovations (e.g. Virtual Reality)!

Update: Average Purchase Price Multiples for FBA Businesses

In our eCommerce M&A Multiples Update from March 2022, we still put the average multiples paid at 4.0 - 4.5x. In the meantime, these have dropped significantly. Currently, we see the majority of deals close at sales prices of roughly 2.0 - 3.5x on the SDE. By sale price in this article we mean all guaranteed payments (fixed sum at signing and guaranteed stability payments). Inventories and earn-outs are not included.

We base our assessment on our own experience as well as on publications of market participants such as Hahnbeck or The Fortia Group.

Brands mit c. $500k SDE

Outlook eCommerce Multiples

Recently, we have been increasingly asked by eCommerce entrepreneurs for an outlook in order to be able to decide whether a sale makes more sense now or in 6 months / a year. The fact is that the current market environment is mainly characterised by high uncertainty. We see that the criteria buyers apply to Brands have become much stricter. While definitely not all brands will find a buyer anymore, we are convinced that the market for strong brands will recover in the medium term. We, like everyone else, cannot predict the exact timing. Therefore, whether a sale makes more sense now or only in a few months depends on many, very personal and company-specific factors.

If you are thinking about an exit, we would be very happy to have a chat and discuss these factors together.

How do I find the right buyer?

The right buyer is determined by a combination of factors such as product category, geography, sales channel, assortment complexity, product size, operational competencies and other decision criteria. In some cases, a potential buyer may even be closed to you if their pipeline is already full, their annual targets have been met or their investment team is simply overloaded.

With Sellside Partners, you benefit from finding and approaching the right prospective buyers through:

1. Personal buyer network

We have a large network of buyers in the area of Amazon aggregators as well as private equity investors and strategic buyers from the industry. We know the buying criteria of these companies, which makes it easier for us to select the right prospects. Through our personal contact, we can ensure quick access and direct feedback loops.

2. Transaction experts

We have already accompanied numerous transactions, both of eCommerce brands and in the context of larger private equity deals.

Therefore, we know what prospective buyers exactly need in order to conduct the necessary analyses prior to a company acquisition. This enables us to optimally prepare our clients for the upcoming sales process and to keep the process lean.

In addition, we have gained experience in the presentation of companies in order to bring their strengths to the fore in the best possible way and to enthuse the buyer for a brand. It happens time and again that buyers do not directly recognise the value of a company and the synergies associated with an acquisition, therefore resulting in a lower valuation. An optimally tailored sales prospectus (investment memo/sales memo), which is an essential part of our service, is therefore of key importance.

3. On your side

Brokers specialising in eCommerce or FBA are just mushrooming at the moment. While they certainly have excellent networks with buyers, there is also the risk of a conflict of interest. In many cases, a broker is looking to close a deal as quickly as possible and without incidents - sometimes at the expense of the purchase price. The hidden fees of aggregators to brokers can therefore lead to disadvantages on the seller side.

That's why we guarantee no fees from buyers to us - not even a free lunch. Your interest is our interest!

Free Consultation


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