Good times to come in Ecommerce acquisition ?

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May 13, 2022

by a searcher from Pennsylvania State University - Altoona in Fort Lauderdale, FL, USA

It has been very challenging to buy ecom businesses in the past two years because of these giant aggregators that are VC backed.


Since the beginning of the year these aggregators are losing value and funding as their thesis is much harder than anticipated to execute.
They are slowing their acquisition pace and we are seeing less multiple offers on DTC businesses. I was trying to buy a business that ended up stop trying to sell because they were not getting their crazy multiple like they thought they would get and would not sell to me because it was "too low" (4X SDE on 2021 numbers, including WC).

I am interested to hear your thoughts on this and if you think we are truly going to see more opportunities on the market.




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Reply by a searcher
from University of Pennsylvania in Texas, USA
Alex - haven't followed the space closely but I read somewhere recently there are an estimated 150+ aggregators that, despite reduced valuations, are still flush in capital. It's important to note though that this capital will likely be reserved for other levers to drive growth in their portfolio vs. aggressive acquisition sprees now that markets have cooled a bit. Are you trying to pursue your own roll up strategy of sorts or operate a single, DTC ecommerce business? If the former, a lot of the value creation from these aggregators has to do with supply chain management capabilities which of course have been challenged recently with the macro environment.

I do know that two good resources to learn more about developments in the space are (1) Marketplace Pulse (https://www.marketplacepulse.com/) and (2) follow Rick Watson’s commentary (on Twitter or at https://www.rmwcommerce.com/blog). I would think there are also valuation differences depending on whether the brand is truly DTC or FBA as the unit economic models vary.
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Reply by a searcher
from Pennsylvania State University in Fort Lauderdale, FL, USA
My goal is to grow the company I run as much as I can, through acquisitions, new line of products etc (www.allsecurityequipment.com). These aggregators will , as you said, work on growth of their existing brands rather than keep on acquiring as their current operations aren't as profitable as they thought it would be. That will give smaller guys some chances to acquire good businesses.

I will check the two resources you mentioned. Thank you.
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