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Key Takeaways From The First Ever Conference For eCommerce Brand Acquirors

Key Takeaways From The First Ever Conference For eCommerce Brand Acquirors

Blog Summary

This blog summarizes the key insights from a conference held for acquirors of eCommerce brands. The conference brought together 75 c-suite executives from FBA and DTC aggregators. The 10 key takeaways include discussions on mergers of aggregators, the rebound of M&A activity, the increase in divestitures of non-core brands, valuations of eCommerce brands, challenges in capital markets and finance, the importance of revenue growth and EBITDA margins, factors affecting aggregator valuation gains, debates on the sustainability of the aggregator model, a shift in firms' self-identification away from the term "aggregator," the emergence of a more collaborative space, and the maturing of the industry. The blog concludes by announcing the next conference to be held in London and provides details for participation.

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Key Takeaways From The eCommerce Acquiror Conference – NY 2024

January 23, 2024

Summary

Our 2024 eCommerce Acquiror Conference took place Jan 16th in New York, hosting eCommerce acquirors and eCommerce operational experts from around the world. The agenda was to discuss key trends driving eCommerce valuations and discuss operational areas within eCommerce acquirors. We thank our title sponsor Airwallex and all our other sponsors for making this great event a success and we look forward to seeing you all and some new faces at our next annual eCommerce Acquiror Conference.

1.eCommerce Environment

Participants: Furhaan Khan at UBS, Bill Pecoriello, CEO at Consumer Edge.

Key Takeaways:

  • UBS and Consumer Edge kicked off discussions reviewing the macro landscape impacting eCommerce valuations.
  • Based on public company comparables, eCommerce valuations have softened. Consumers spend is forecasted to transition from post covid high sectors such as travel however consumer spend in general remains subdued by caution towards inflation and interest rates.
  • Medium view (2025-2027) is that M&A volumes will be expected to increase once again as inflation starts to curb and the cost of capital stabilizes.

2.Acquirors

Participants:

Session 1 Panellists:

    • Philipp Triebel, CEO at SellerX.
    • Mark Goldfinger, VP of Growth at unybrands.
    • Ben Cogan, Co-Founder at Agora.
  • Insight provided separately by Tushar Ahluwalia, CEO of Razor, who have a successful record in consolidation of aggregators [Stryze & Valoreo].

 

Session 2 Panellists:

  • WTB Co-CEOs, Jaschar Hupperth and Nicolai von Enzberg.
  • Olsam Group Co-Founders: Ollie and Sam Horbye.

Key Takeaways:

  • Announcing 2 New Mergers Of Aggregators: The Fortia Group was proud to announce the merger of We The Brands and Mantaro Brands, two German based aggregators, a deal that The Fortia Group had been appointed M&A advisors.Weeks before the conference the eCommerce world learned about the successful merger between Olsam Group [UK based] and Dwarfs [NL based].It was noted that while these are logical strategic moves and something many in the aggregation space will be considering, these deals do take longer due to the complex nature of appeasing a larger group of shareholders. Deal timelines were from 6 to 12 months in duration.

 

  • Consolidation (MoA) and Acquisition Trends: Acquirors in the space are communicating more discussing topics and solutions to issued being created. Consolidation within the market is an important topic.The macro implications of cost of capital in the current environment consolidation are a lot more complex than straight M&A due to the fact they are share deals with limited cash changing hands.The main reason for consolidations are as follows:
    • Strengthening Balance Sheet
    • Scale
    • Cash
    • Leverage
    • Group EBITDA

 

  • Challenges of Market Conditions: Panellists discuss the challenges faced over the past year, including lower consumer spending due to inflation, pressure on margins, the rise in interest rates, and the general move towards a survival mode among companies.
  • Direct-to-Consumer (DTC) Focus: The preference for DTC over Amazon (FBA) due to control over customer data, customer support, marketing, and the overall customer experience (CX) is emphasized.Amazon remains a focus, but many are becoming more interested in diversifying into DTC or gain back more control through this channel, particularly as increasing Amazon operational fees are forecasted for 2024.

 

  • Integration of AI and Technology: eCommerce players have a range of tools available to help them achieve success in the markets.AI is delivering solutions for cost savings removing resource requirement on content, customer service benefits by reducing SLA’s pricing and demand planning.

 

3.Acquisitions

Participants: Alex Lukashov, CEO at Fintent, Muddy Mat, Johannes Rossner [on behalf of Alpin Loacker and BBG), Daniel Mc Carthy, Co-Founder at Theta, Paul Hanley, Co-Founder at The Fortia Group and Withum CPAs.

 

  • Our Shark Tank Brands Were A Big Success:
    • Introducing Muddy Mat – Impressive omnichannel pet brand coming to market in Q1 2024. Matthew, Andrew and Ikho gave a fantastic demo and financial performance overview of the brand.
    • Alpin Loacker – EU based tech hiking clothing and equipment omnichannel brand.
    • Berlin Brands Group – US portfolio. BBG wish to refocus efforts and as such are open to offers for their current US portfolio.

To learn more about any of the above deals, please contact The Fortia Group directly.

  • Daniel Mc Carthy, Co-Founder at Theta educated the crowd on valuations with this talk on “Uncovering Hidden Valuation Insight through Predictive Customer Value Analysis”, followed by a poll on current valuations observed in the market.

Poll no.1: What is the typical valuation range you are seeing for profitable Amazon FBA led brands?

  • Average valuation range: The average lower bound of the valuation range is approximately 2.86x, and the average upper bound is approximately 4.13x.
  • Lowest valuation range: The lowest valuation range given was 1x.
  • Highest valuation range: The highest valuation range provided was 8x
  • Please note all valuation ranges are EBITDA multiples.

Poll no.2: What is the typical valuation range you are seeing for DTC led brands?

  • Average valuation range: The average lower bound of the valuation range is approximately 3.78x, and the average upper bound is approximately 6.06x.
  • Lowest valuation range: The lowest valuation range given was 2x.
  • Highest valuation range: The highest valuation range provided was 12x.
  • Please note all valuation ranges are EBITDA multiples.

 

  • Paul Hanley, Co-Founder at The Fortia Group brought the audience through the firms new Buy-side diligence offering. The Fortia Group have been servicing investors and credit funds but are now formalizing their Buy-side diligence offering, a rapid initial target screen, to learn more please contact The Fortia Group directly.

 

 

04.Value Creation

Participants:

Will Holtz, Head of Operations at SourceMedium

Daniel Mc Carthy, Co-Founder at Theta

Robert Sperling, CEO at EastWest Basics

Rupesh Sanghavi, Founder & CEO at Ergode

Jim Stine, VP of sales at ShipPlug

Naseem Saloojee, Co-Founder at Carbon6

Kevin Fischer, President At KAPOQ

Bill Tauscher, CEO at Farallon Brands

Balaji Kolli Co-Founder at Saras Analytics

CFO Josh Holley at Bare Performance Nutrition

Jacob Cook, CEO at Tadpull

Heath Barnett, Head of SMB & Growth, North America at Airwallex

Jim Mann, VP of Europe at Getida

Ben Fletcher, CEO at The Mothership

Joseph Falcao, CFO at Orva

Shawn Dougherty, COO at Society Brands

Alex Urdea, Founder at Deep Ocean Partners

 

Key Takeaways:

  • Title sponsor Airwallex spoke about the important of localised payment options and how this was going to be crucial as part of a hyper-localised targeting strategy for eCommerce today and into the future.
  • Local payment methods accounted for 77% of transactions worldwide.
  • 44% of consumers are likely to trust online shop that offers their preferred payment methods.
  • The supply chain panel agreed that the rise of manufacturers going direct to the customer via marketplaces will continue to cause difficulties for eCommerce acquirors. It will be difficult to compete on price, however, as always obsessing over CX, branding and marketing strategy always have their place in combatting this type of competition.
  • A common theme throughout value creation talks were the importance of visiting and developing relationship with suppliers globally. Often this can open up different credit terms or cost efficiencies over time.
  • Predications for 2024 on supply chain were mixed as we move further from a covid container spike yet current situations in Suez Canal may continue to cause delays and additional cost.
  • KAPOQ and Carbon 6 explained that obsessing over performance metrics and investment benchmarking were crucial for brands and operators to double down on, with new Amazon marketplace fees forecasted to hit 2024, operators should be focusing on where they can make savings and efficiencies within the P&L.
  • CFO Josh Holley brought this to life with insight into how his brand, Bare Performance Nutrition are optimizing with data support and help from Saras Analytics.
  • Scrutinizing costs and ensuring you are setup for future success was a common theme, Bill Tauscher at Farallon Brands explained the importance of agility in retail, the role of eCommerce and marketplaces, and a view on timing when discussing growth plans with big retail.
  • Conference Partners Jake Cook, CEO at Tadpull and Daniel Mc Carthy, Co-Founder at Theta discussed the importance of understanding and using data sets to help with prediction analysis or growth forecasting.

 

Poll no.3: What is your top financial and operational priorities for 2024?

  • Become cashflow positive: 45%
  • Increase corporate EBITDA margins: 23%
  • Revenue growth: 13%
  • Reduce leverage: 12%
  • Improve inventory turns: 7%

Poll no.4: What is your target for corporate EBITDA by end of 2024?

  • Unprofitable: 0%
  • 1-5% margins : 20%
  • 6-10% margins: 10%
  • 11-15% margins: 60%
  • 16-20% margins: 10%

Poll no.5: What will drive the biggest valuation (profit multiple on exit / listing) of aggregators?

  • Financial profile e.g. corporate EBITDA margin: 15%
  • Brands: revenue quantum, growth, net margins: 54%
  • Being truly omnichannel: 8%
  • Tech & Data competence: 0%
  • Scale efficiencies: 8%
  • Other: 1%

 

Need some comments from the finance and operations panel.

Need a comment from an investor in the space [ don’t name Alex Udea].

Need success stories comment, don’t need too much detail on that.

 

We thank all our sponsors, without them conferences like this would not be possible. We look forward to working closely with you all throughout 2024.

  • Airwallex | ConferenceTitle Sponsor
  • BigCommerce
  • Carbon6
  • Eastwest Basics
  • Factored Quality
  • Getida
  • Grips
  • KAPOQ
  • Saras Analytics
  • ShipPlug
  • Withum

As we mentioned at the event, this will become an annual event, and together, we look forward to making the next one bigger and better.

 

Blog Summary

This blog summarizes the key insights from a conference held for acquirors of eCommerce brands. The conference brought together 75 c-suite executives from FBA and DTC aggregators. The 10 key takeaways include discussions on mergers of aggregators, the rebound of M&A activity, the increase in divestitures of non-core brands, valuations of eCommerce brands, challenges in capital markets and finance, the importance of revenue growth and EBITDA margins, factors affecting aggregator valuation gains, debates on the sustainability of the aggregator model, a shift in firms' self-identification away from the term "aggregator," the emergence of a more collaborative space, and the maturing of the industry. The blog concludes by announcing the next conference to be held in London and provides details for participation.

Read Time: 5 minutes

In January and April 2023 we hosted roundtables for acquirors in New York and Amsterdam respectively. Given their success we decided to enhance the roundtables to a larger format. On June 8th 2023 we hosted the world’s first ever conference for acquirors of eCommerce brands. 75 c-suites attended from both FBA and DTC aggregators. The purpose of this article is to showcase the 10 key takeaways from the conference:

 

  1. Merger Of Aggregators (“MoA”)
  • The CEO’s of SellerX (Philipp) and The Ambr Group (Yazan) discussed the fundamentals and dynamics of their recent mergers/acquisitions. Key factors included being up-front and honest about approaches to relative valuation.
  • We polled the audience about consolidation. The results show that 68% of respondents are having informal discussions, with the remaining 32% are not currently in any discussion.
  • The audience were polled again about what the key drivers of mergers/acquisition in were in their view. Below are the results:

– 36% stated cost synergies.
– 24% stated scaling revenue growth.
– 12% stated debt consolidation.
– 12% said strategic (e.g. need of a tech platform).
– 8% said geographic.
– 8% said other.

 

  • The Fortia Group is sellside advisor to a German aggregator with a strong technology platform. Please contact us if that is of potential interest: inquiries@thefortiagroup.com.
  1. M&A Is Rebounding, Slowly
  • H2 2022 was one of the worst periods for global M&A in several years. However, the first half of 2023 is seeing relatively more activity.
  • To gauge the true nature of this rebound we asked the audience how many brands their firm acquired in the last twelve months.

– 48% acquired 5 to 13 brands.
– 26% acquired 5 to 10 brands.
– 15% acquired 0 to 4 brands.
– 11% acquired >10 brands.

 

  • The aggregators that are acquiring typically fall into three buckets: (i) firms that are profitable at the corporate EBITDA level; (ii) firms that have just completed mergers / acquisitions; and (iii) new firms that recently raised capital.
  1. Non-core
  • As more aggregators narrow or refine their focus there will be an increase in divestitures.
  • The Fortia Group has been appointed by three aggregators to sell their non-core brands.
  • If you would like to discuss selling your non-core brand(s) contact us: inquiries@thefortiagroup.com.
  1. Valuations
  • In our “Q1 2023 eCommerce Brands Valuation Report” we published a valuation range for FBA brands (2x-4.5x SDE) and DTC brands (2x-10x). Note: this includes up-front and deferred consideration.
  • The above range for FBA brands was supported by 42% of the audience stating they paid between 3x-4x SDE and 21% paying 2x-3x SDE.
  • In our opinion more stable and realistic valuations will benefit the industry enabling a return to the valuation arbitrage seen in early 2021 and before.
  1. Capital Markets & Finance
  • It is clearly very difficult to raise equity or credit given the current market conditions. Funding opportunities are likely to be very limited in the next 12 months.
  • An attendee commented “many aggregators have serious capital structure and liquidity issues due to debt service”. The current interest rate (pa) of those attending was distributed as follows:

– 56% between 10% to 15%.
– 24% < 10%.
– 20% >15%.

 

  • An overriding theme from this topic was that the lenders will soon be “calling the shots” if the management teams and equity holders don’t quickly resolve how to get to cashflow positive.
  • The Aggregator business model is predicated upon the ability to supercharge the revenue growth of the brands acquired. As these brand are folded into a wider portfolio, we wanted to gauge if revenue growth was at the level that exceeded the market. We asked the firms attending to indicate their Gross Revenue (GAAP) growth:

– 68% had growth (defined as > 5%).
– 21% were in decline in decline (defined as above -5%).
– 11% were flat (defined as +/- 5%).

 

  • To gain a further understanding of Aggregator corporate performance we asked for firms corporate level EBITDA margins:

– 40% responded <5%.
– 32% responded 5%-10%.
– 24% responded 10%-15%.
– 4% responded  >15%.

 

  • It is clear that the Aggregator model is subject to the same market forces and challenges that the brands they acquire face. Those who can manage their cost of capital and implement controls to their variable cost base will inevitably thrive in the ultra-competitive world of online marketplace retail.
  1. Aggregator Valuation
  • We asked what the biggest valuation (profit multiple on exit/listing) gains of aggregators was. Note: respondents could select up to 3 items.

– 62% said brands (revenue quantum, growth, net margin).
– 57% said financial profile (e.g. corporate EBITDA margin).
– 29% said technology and data competence.
– 24% said being truly omni-channel.
– 10% said scaling efficiencies.

 

  1. Sustainable model
  • In a recent blog GoNorth, Accel Club, Joseph Falcao and The Fortia Group articulated why we believe the business model of aggregating eCommerce brands is sustainable.
  • Despite the positive vision, some did not agree. One attendee commented “I think the key issue here for the room and for Fortia is that the existing Amazon aggregator model doesn’t work. We can discuss at length but that’s the punchline. So that means capital will be scarce. All these aggregators merging is a sideshow that doesn’t address the underlying issue with the model”.
  1. Aggregator
  • As the space evolves, many firms are increasingly no longer calling themselves an “aggregator”.
  1. Collaborative Space
  • In the past firms were very secretive, whereas we currently observe a much more of a collaborative and collegiate approach. This is evidenced through the quantum of attendees at the conference. As one attendee commented the conference was a great “temperature check within our industry”.
  1. Maturing space
  • The overarching view of the audience and a key takeaway is that 2021 was the year of M&A, 2022 was the year of operations, and 2023 is the year of survival and maturing of the industry.
  • An attendee commented: “the industry is in about the same situation and it is not as dire as it is made out to be”.

 

The next conference will take place in London on September 14th 2023. The morning agenda will include 20 brands pitching to acquirors and the afternoon agenda will be an ‘Acquiror Mastermind’. Please contact us to learn more at inquiries@thefortiagroup.com.

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