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eCommerce M&A Multiples Update Q2/2023

Updated: Aug 15, 2023

The turbulence of the past year has not yet subsided. However, compared to the second half of 2022, we can observe an increase in M&A activity and higher multiples. This is our third update on the eCommerce multiples and buyers we have registered, taking a closer look at the ever-changing market situation. Since the boom period in 2021, there have been drastic market shifts. Below, we describe the current situation in detail.



M&A eCommerce Multiples


In the M&A of the eCommerce industry, multiples play a central role in company valuation. During the peak period from the beginning of 2021 to the end of Q1 2022, we recorded a remarkable increase in multiples, with an average of around 4.5. Important: We are talking here about pure upfront multiples, i.e. the purchase price payment directly after signing the contract and excluding stability and earn-out payments. In addition, we refer to brands that generate the majority of their sales on Amazon. This historically high number highlighted the increased interest in eCommerce companies and FBA brands in particular. Purchase prices were driven by competitive bidding by mostly freshly founded aggregators, whose funding was fuelled by historically low interest rates and unprecedented money supply growth by central banks.


After the high comes the low. As a result of monetary policy flooding, inflation was brought out of its more than 10-year deep sleep. In textbook fashion, central banks responded with rising interest rates, bringing the capital markets to a standstill and with them M&A activity. The entire eCommerce industry, one of the beneficiaries of low interest rates, was hit particularly hard here. Multiples bottomed out at an average of 1.5x on the SDE. At this point, we saw significant investor reticence due to changing market dynamics and uncertainties.


Since the end of 2022, we have seen a slight improvement in the situation. The concern that inflation is not “transitory” but will be with us for longer has turned into a certainty. Accordingly, investors can expect permanently higher borrowing costs and start looking for acquisitions again on a counter-cyclical basis. In the current environment, average upfront multiples paid in the eCommerce industry are around 2.0 to 3.0x. These numbers reflect recent market trends and show that investor confidence is slowly returning to the industry. It is important to mention here that buyers have become much more selective and that not every eCommerce entrepreneur looking for an exit is actually finding a buyer anymore. However, the recovery of multiples for strong brands indicates that eCommerce companies are still attractive acquisition targets and that potential buyers are willing to pay reasonable premiums for promising brands. However, we do not see bidding races with multiples of 6x and more anymore and are convinced that this will remain the case for the foreseeable future (and, as long as borrowing money remains to costs money). Our assessments are based on our own experience as well as industry-relevant publications, including sources such as Hahnbeck and The Fortia Group.


Decrease of Multiples


What factors contributed to the decline in multiples compared with the peak phase? Market uncertainty in connection with the ongoing crisis plays an important role.

The main factor is the previously mentioned interest rate developments both in the USA and in Europe. Higher interest rates make corporate acquisitions, which are often financed with debt, significantly more expensive. These additional costs are reflected in lower purchase prices.


Secondly, higher interest rates and the general economic situation are affecting the purchasing power and willingness to consume of end customers as well as the cost structure of companies. Accordingly, companies are increasingly focusing on their own business and putting growth plans such as company acquisitions on hold.


Third, geopolitical uncertainties have risen sharply with the Ukraine war and ongoing tensions around Taiwan. Escalations that were previously dismissed as unrealistic are now included in the risk assessment. In particular, eCommerce entrepreneurs with supply chains to China are affected.


Brands with c. $500k SDE


It is important for us to note at this point that brands that generate the majority of their revenue direct to consumers (e.g. through their own website) or have a very diversified channel split (e.g., with offline retail) can achieve significantly higher multiples. However, the range of expected multiples is much wider and depends on many factors, which is why we have refrained from a general assessment of the market for those brands at this point.


M&A eCommerce Buyer Landscape:


eCommerce brands have diverse buyer groups - especially in the small and mid-cap segment. Let's take a closer look at the four main buyer groups of eCommerce companies:


1. Aggregators:

There are several developments to watch in the aggregator space. Takeovers, mergers and bankruptcies are expected to reduce the number of buyers as companies join forces and seek a stronger market position. Weakening aggregators will struggle with the high interest payments. In terms of aggregators, a distinction must also be made here as to when they entered the market and, accordingly, must adopt different approaches strategically.


Early-stage aggregators represent the majority of aggregators active in the market and face significant challenges. High initial multiples and mistakes in the first months / first year represent legacy issues that need to be addressed. Their focus is therefore increasingly on consolidation strategies to strengthen their position and optimize their business models.


Late-stage aggregators in comparison benefit from the experience and best practices they have gained from early-stage aggregators. Ideally, this enables them to avoid costly and time-consuming mistakes. In addition, they benefit from lower multipliers and carry fewer or no legacy assets. Their focus is on brand acquisitions to expand their portfolio and further extend their market presence.

2. Financial investors:

Financial investors show an increased interest in eCommerce companies. This is primarily due to the fact that eCommerce multiples are low and the eCommerce brands themselves are usually highly profitable. Alternative investment opportunities, such as in the technology sector, are becoming less attractive due to lower or non-existent profitability in an environment of high interest rates. Because financial investors are now looking at profitability, they are increasingly looking at bolt-on acquisitions for their existing portfolio companies. Such acquisitions allow them to create synergies and further drive growth.

3. Strategists:

Companies with available capital that act strategically are also showing interest in eCommerce companies. They want to expand their product portfolio and open up new sales channels to strengthen their competitive position and reach new customer segments. The current market environment invites strategists with healthy financials to make acquisitions.

4. Private investors:

Another interesting trend is the increasing interest of private individuals in acquiring eCommerce companies. They recognize the opportunities offered by the eCommerce market and are motivated to take these companies to the next level.


The diversity of buyer groups offers sellers a wide range of potential prospects for their eCommerce business. When selecting the right buyer, the individual goals and needs of the seller play a decisive role. As M&A advisors, we support entrepreneurs in the search and selection of the right buyer and accompany them throughout the entire sales process.


Outlook on eCommerce Multipliers:


For a more comprehensive analysis of future market developments, we invite you to read our article that specifically addresses the outlook for eCommerce multiples. "Maximizing Your eCommerce Exit: A View on the current and future eCommerce multiples"


How to find the right buyer?


Critical to a successful buyer search is a combination of different factors such as product category, geography, sales channel, assortment complexity, product size, operational competencies and other decision criteria. Even when suitable potential buyers have been identified, rejections may occur if their M&A pipeline is already full, annual targets have been met, or their investment team simply cannot be reached.


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


1. Personal buyer network

We have a large buyer network, both in the Amazon aggregator space and with 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 advised on numerous transactions, both of eCommerce brands and in the context of larger private equity deals.


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


In addition, we have gained experience in presenting companies in such a way that their strengths are brought to the fore and the buyer becomes enthusiastic about a brand. It happens time and again that buyers do not directly recognize the value of a company and the synergies associated with an acquisition. This results in lower valuations or a decline of interest. An appealing sales prospectus (investment memorandum) that is optimally tailored to the buyer group, which is an essential part of our service, is therefore of elementary importance.


3. On your side

Brokers specializing in eCommerce or FBA are springing up all over the place these days. While they are certainly excellently networked with buyers, there is often a risk of conflict of interest. In many cases, a broker is looking to close a deal as quickly as possible and without incident - sometimes at the expense of the purchase price. The hidden fees paid by aggregators to brokers can therefore lead to disadvantages on the seller side.


We guarantee no hidden fees - not even a free lunch - from buyers to us!


Free Consultation



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