27 February 2022

Is 2022 the Right Time to Exit your Amazon business?

Matthew Walker
Matthew Walker
Is 2022 the Right Time to Exit your Amazon business?
Read Time: 4 minutes

On February 27, 2022, we hosted three directors from the biggest aggregators (Berlin Brands Group, Branded, and unybrands) on our webinar to discuss: Is 2022 the Right Time to Sell your Amazon FBA? 

All three said “yes, it’s a good time to sell your FBA,” and pointed to recent market trends, beginning with the huge raise in capital. 

It’s a Sellers’ Market

In the last 18 months, aggregators have raised a staggering amount of capital ($13 billion). To justify the raise, this money needs to be deployed quickly on profitable assets; aggregators need to build up a portfolio of growing brands that can be further optimized to justify the debt raised. This has effectively created a sellers’ market, where aggregators are competing for the best brands. As a result, valuations have increased. 

However, it should be noted that aggregators are actively seeking quality eCommerce brands. So, of course, they are going to make the case that now is a good time to sell, because they are looking to buy. 

That said, if you are looking to exit in 2022, their market analysis is compelling. 

In this post, we provide an overview of each aggregator presentation, and highlight their main point. Then we end by explaining why you should partner with The Fortia Group to get the best deal for your eCommerce business.  

First step to selling your eCommerce business is knowing how much it is worth. Contact us today for a no-risk, free valuation

Stock Market Drop

Christian Salza of the Berlin Brands Group presented on the current dip in stock prices. He took examples from The Hut Group, Wayfair, Made.com and even DTC platforms like Shopify to show how a decline in stock valuation for public companies is declining. 

Without the available data in a private market like eCommerce exits, aggregators use a proxy (like one of the parent companies above) to benchmark their valuation. The decrease in valuation on the stock exchange forecasts a slowing of the eCommerce market in the near future, suggesting that the valuation you could receive now, is likely to decline in the future. 

 

Inflation Leading to Higher Interest Rates

Alex Lardugin from Branded looked at how rising inflation in the US will have to be offset by an increase in interest rates. A measure to stimulate growth after the financial crash (2008) was to keep interest rates low. This allowed companies to raise debt with far less risk. However, with rising inflation rates, there are rumblings (from the White House and everywhere else) that interest rates are set to rise in 2022. 

As most aggregators are operating off high debt, increased interest rates will put the pressure on aggregators to deliver more profitable assets in less time. Mr. Lardugin forecast that a number of aggregators might not survive the year, and a consolidation in the market is inevitable.

Bigger buyers will purchase smaller buyers with good brand portfolios and aggregators might look to growing the current portfolio rather buying up more brands. 

This will cause higher competition for niche assets, but lower multiples overall. 

Lower Net Margins & Increased Marketplace Competition

Alexey Lankin from unybrands focused on increased headwinds in 2021 making it increasingly difficult for sellers to maintain high net margins. 

These include: 

  • Rising PPC costs
  • Volatile supply chains
  • Amazon tariffs
  • Unexpected new regulations

The Covid bump in eCommerce sales of 2020 leveled off in 2021. Brands that had rebounded from the supply chain storm of 2021 might want to exit quickly – having witnessed the unpredictability of the market. 

Furthermore, he pointed out that well resourced aggregators were now competing with decentralized sellers in the marketplace. This was going to make it more difficult for sellers to grow their brands, and maintain high margins, suggesting now is the best time to exit.

 

Partner With The Fortia Group to get the Highest Valuation

If you want the best return on your eCommerce business – which you have grown over the last few years – you need an exit strategy

Engaging potential aggregators without understanding the exit process only favors the buyer and often results in a lower valuation. 

See this case study. Our client received $2.5 million more by partnering with The Fortia Group.

The Fortia Group are a M & A firm with decades of experience in investment banking, corporate finance, and ecommerce. When you partner with us, we:

  • Prepare your business to sell (Exit Ready) 
  • Present it to the right group of buyers and conduct a competitive auction.  
  • Run a professional exit process that achieves the best deal (Exit Process) 

Your first step? Know how much your business is worth. Get started today with our no-strings-attached, free valuation

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