07 May 2022

Aggregator Distress, Layoffs, Acquisition Halt – Is This The Real Story?

Matthew Walker
Matthew Walker
Aggregator Distress, Layoffs, Acquisition Halt – Is This The Real Story?
Read Time: 6 minutes

If you took an interest in the eCommerce aggregator space over the last month, and began reading all the relevant headlines in your LinkedIn feed, you might conclude the entire industry was a fad and is now on the brink of collapse. 

Recent headlines:

  • Distressed Aggregator Seeks Buyer
  • Top Aggregator Lays Off Entire Division
  • Lead Aggregator Pauses Acquisitions

Headlines like these spread a negativity that does not represent the aggregator space en masse. 

While they are factually correct – Factory14 was distressed and acquired, layoffs were announced at Thrasio this week, and some aggregators have paused acquisitions – they certainly do not tell the full story.

In short, negativity sells – we have the neural science (see negativity bias) and media to prove it. 

However, in a news cycle that has been dominated by huge equity and credit raises ($15bn in capital), growth and opportunity (100+ aggregators in <24months), the first sign of aggregator failure has cast a shadow across the entire space, and is in danger of eclipsing the real story – that most aggregators continue to grow, acquire brands, and meet targets. 

Note: Not all “mergers of aggregators” (MoA – coined by E. Kilduff, CEO, The Fortia Group) are distress related. Olsam Group recently acquired Marketfleet to expand into new markets. The Fortia Group has secured the ability to partner with a world-leading investment bank to advise aggregators on their corporate finance needs – Contact Us.

The Best Aggregators Are The Best Operators

Some have tried to dismiss the brand aggregator model as unproven, but as Sean Lee, CEO of Cincy Brands, recently wrote, “The brand aggregator model works, and it’s been happening since the 1800s with P&G.” 

Mr. Lee went on to decry the real issue, “What doesn’t work is the operations and project management nightmare of trying to integrate 150+ different brands in a couple of years.”

At The Fortia Group, we are in a unique position because while we work for the seller, we also work closely with the buyer. We cannot properly advise our clients and oversee the exit process unless we have built up trust with our buyer network. Differentiating between buyers can only be achieved at an operational level, leading to one of our key principles: The best aggregators are the best operators. 

The quantum of capital raised over the last 18 months launched >100 aggregator startups with cash that needed to be deployed quickly. This led to some acquiring up to 80 businesses in a single year (unprecedented in the history of M&A). 

Are we surprised that some did not buy the right assets, nor hit their targets? The market is maturing and winners and losers will be revealed based on how their assets have performed. 

While we do not underestimate the pain and worry the few distressed aggregators have caused, it shouldn’t represent the market.  

The best thing we can do is learn from the mistakes made, and focus on the vast majority of aggregators that continue to grow, acquire, and hire. 

That said, we reached out to a number of aggregators in our buyer network and asked them to share some stats from Q1 2022, under three headings that signal market health:

  • Growing brands and Operations 
  • Acquiring and Launching New Brands 
  • Hiring New Talent

#1 Growing Brands and Operations

With the Covid/Post-Covid headwinds of supply chain issues and increased PPC in Q4 of last year, let’s hear from Accel Club,  Berlin Brands Group, Dwarfs, Elevate Brands, Foundry and Olsam Group as to how they responded in Q1 of this year. 

“The eCommerce space including Amazon’s third-party segment is the future of consumer buying. Year-on-year, Accel Club saw double-digit revenue growth in our portfolio, and our team grew from 25 to 130 people further strengthening our operational expertise and accelerating the growth of our brands and new product development.  We expect to expand our portfolio with fast-growing businesses with an additional value of $350M in the near future. We remain steadfast in our commitment to contribute to the eCommerce community.”  

Askar Bagaviev, VP of Acquisitions, Accel Club

“While many of the “aggregators” mainly focused on portfolio build-up in 2021, BBG also strengthened its logistics framework. This included expanding our warehouse space by more than 100,000 m2 in Werne, Germany, with a maximum shipping capacity of 100,000 packages per day. Further international projects of this kind are in the planning stage, so we are well prepared for the increased sales growth resulting from the brand acquisitions.”

Christian Salza, MD Global Expansion, Berlin Brands Group

“There is pressure on the market for sure. Despite a downtrend on Amazon of 3% in Q1, at Dwarfs, we managed to grow our whole portfolio on Amazon by 18%.”

Kenny Vaes, CIO & Corporate Development, Dwarfs

“Over 90% of our brands are now selling on Walmart or outside of the US, and once ramped by our in house advertising specialists these additional distribution points now account for approx 10% of our revenue ” 

James Prewitt, International Marketplace Director, Elevate Brands

“Foundry drove double-digit organic growth across its brands in the last 6 months vs. the same period last year, benefiting from its strategy of acquiring brands that truly connect with its customer base, realizing synergies across the portfolio, operating multi-channel including D2C vs. only Amazon, and partnering with its brand founders post-acquisition.” 

Helen Vaid, CEO, Foundry

“Our strategy with each brand is always 100% growth, whether that’s with new channels, geographies, or product development.  While we have seen growth across our entire portfolio, Peak Coffee is a neat example of our strategy in our action. Our efforts have driven a 121% increase in gross sales, and a 114% increase in units sold, annually.”

Sam Horbye, Co-Founder, Olsam Group

Whether proving out the numbers in the short term or investing in operations for the long term, the best operators in our network have shown the ability to pivot and recalibrate strategy in response to the market. 

To hear more, check out our one hour webinar: Growing Brands through Smart Operations. Leading operators from Acquco, Berlin Brands Group, Boosted Commerce and unybrands share how they rapidly accelerate brand growth.

#2 Acquiring and Launching New Brands

Very few aggregators (<10 in our buyer network) have paused acquisitions. Some have pointed to this decrease in buying across the board as a portent of market decline. However, in a young, rapidly growing market this is a sign of maturation. Aggregators now have the data to show which assets are performing well; the best aggregators will respond by becoming more diligent (and cautious) in the brands they buy – favoring quality over quantity. This should be a welcomed move, rendering a more stable marketplace. 

That said, most of the aggregators in our network are open for business. 

Note: The Fortia Group closed a sale last week for a brand in Baby care:  

  • 12 LOIs received, with a multiple range of 5X – 7X
  • 7 buyers upped their bid to win the asset
  • Final consideration >7X multiple (including deferred)

Looking to exit in 2022? Contact us today for best advice in selling your eCommerce business.  

Let’s hear from BRANDED, D1 Brands, Ergode, and The Stryze Group on acquiring new assets since January, 2022. 

“Our teams have strongly focused on new product launch capabilities in Q1 2022. Over the past four months, BRANDED has launched over 50 new products – enabling us to grow our brands’ product portfolios organically. We also celebrated the launch of 2 internally developed brands, solidifying our strategy to both acquire and build brands in attractive niches.”

Patrick O’Connell, Chief Strategy Officer, BRANDED

“At Ergode, we are aggressively hiring to meet demand; adding new talent to our already 600+ global team each day. We are currently in the process of acquiring three brands (under LOI), one with an exciting patent portfolio. Furthermore, we have developed a software to optimize spending on Walmart.com – doubling the sale and spend while keeping ACOS constant.” 

Rupesh Shanghavi, CEO, Ergode

“While we cannot ignore the short-term challenges facing the broader economy, over the last 12 months we have grown our brand portfolio by >110%, expanded into seven additional AMZ marketplaces, launched 115+ new SKUs, and invested millions into product development, supply chain infrastructure, and new hires.” 

Zack Flint, Chief M&A Officer, D1 Brands

“Since Q1 2022, Stryze Group has increased the number of employees by 32%. Strategic senior hires were added in areas such as logistics, social commerce and strategy / business development. We are also pleased with the performance of our brands in a challenging market environment. Axion, our recent acquisition in the TENS / EMS device and broader pain prevention space – for example – is on a healthy growth trajectory, based on new product development and the platform expansion to bol.com, otto.de and others.”

Dr. Taro Niggemann, Co-Founder, CIO & CFO, The Stryze Group

Opportunity: Launch of the Niche Aggregator

Aggregators that have rapidly expanded their brand portfolio across the full spectrum of categories can struggle to optimize these assets, as each category requires unique expertise.

One marketplace solution we have seen is the launch of new niche aggregators, and by “niche” we mean by geography (e.g. India), category (e.g. medical) or theme (off Amazon marketplaces). 

That said, in response to current headwinds and a downturn in the market, most aggregators are refining their buying criteria and focussing on key categories only. This is covered in depth in our recent webinar: Acquisition Criteria of Buyers in a Bear Market.

 

#3 Hiring new talent

Growing teams has always been a high level metric of market health. A simple search on LinkedIn reveals jobs posted by aggregators in the last month: 

  • Berlin Brands Group: 25
  • Perch: 18 
  • Razor Group: 31

The list goes on. 

In response to current headwinds, most of these jobs are operational roles in technology and growing brands. 

Let’s hear how Forum Brands, Foundry, and unybrands have grown their team in 2022.   

“At Forum, we’ve made a concerted effort on building sustainably, taking a quality over quantity approach to acquisitions and subsequent brand building. We continue to expand into new markets and channels, such as Walmart, and have invested in strategically expanding our employee base to support our growth, increasing our team by nearly 60% in 2022, already.”

Brenton Howland, Co-founder & Co-CEO, Forum Brands

“The Foundry team has grown ~250% since July of last year and we’re actively recruiting new hires across multiple disciplines to support future brand acquisitions and channel expansion.” 

Helen Vaid, CEO, Foundry

“We have been incredibly fortunate in our ability to hire exceptional talent across our team. Led by industry veterans our globally located team’s backgrounds span across e-commerce, CPG, technology, operations and scaling high growth startups. Now with over 100 employees across 6 hubs spanning Berlin, London, Miami, New York, Seattle, and now Shanghai we have been able to achieve sustainable fast growth for our company.”  

Mark Goldfinger, Senior Director of Growth, unybrands

In the context of recent layoffs, it’s good to remember that the ecommerce space has plenty of room for growth – it still only accounts for 25% of all retail in the US. The silver lining? Those with real eCommerce expertise, who find themselves in the unfortunate position of being laid off, should have no problem finding work in this climate. 

There is a lot to celebrate in Amazon aggregator space right now.

About The Fortia Group

The Fortia Group is a global M&A firm for eCommerce that provides an investment banking approach to selling eCommerce businesses. Fortia brings decades of M&A, corporate finance, and eCommerce experience to your exit, having managed multiple seven-and-eight figure exits to date. With additional mandates for brands in categories such as baby, beauty, home, outdoor and supplements, Fortia is on track to advise on >30 exits by the end of 2022.

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