Read Time: 5 Minutes
[We would like to thank Accel Club for sponsoring this event].
Due to an influx of headwinds caused by geopolitical conflicts, downturn in the market, post-pandemic landing etc., 2022 was the worst year for M&A (eCommerce included) since 2008.
In order to discern actionable sector insight in a rapidly changing market, we host a quarterly thought-leader event with top eCommerce acquirors. We discuss how global trends are impacting the industry and what are the implications for sellers and buyers on a deal-to-deal basis.
In this round-up piece we will look at the top takeaways from our recent eCommerce Aggregation event in Amsterdam, highlighting polls we conducted around these themes:
- Current Acquisition Status
- Operations: Broad Vs. Niche
- Brand founder involvement post-close
- Goals and prediction for 2023
- Mergers of Aggregators [MoA]
Have you joined our exclusive Acquirors Network? Fortia’s Acquirors Network is a curated community of C-suite in eCommerce M&A built around thoughtful discussion and quarterly events. Inquire HERE.
Is your firm currently acquiring?
- Yes 95%
- No 5%
While firms are technically acquiring, per our end of year Survey of Acquirors, the numbers are significantly lower than our 2021 survey.
- Expected 2023 deal volume per firm: 5 – 10 deals [vs. 2021 forecast: >30 deals].
- Valuation multiples were reported between 1.5X – 4.5X EBITDA range for 2023 [vs. >5X EBITDA in 2021].
The yearly forecasts among leading investment banks debated whether markets were headed for a recession or soft landing towards the end of 2023. However, all agreed that growth would continue to soften, inflation would decrease, and rate hikes would be less aggressive. The confluence of which have impacted valuations. All signs point to an emerging buyers’ market in 2023, as opposed to the sellers’ market of 2020.
Will the winning aggregators have a niche or broad focus?
- Niche 23%
- Broad 27%
- Combo 50%
In our Survey of Acquirors , 64% of firms planned on focussing on fewer categories in 2023. This was reiterated at our NYC event [January 2023]: the majority of firms had a preference to focus on a single or small number of categories.
However, in Amsterdam [March 2023] several firms said they were not seeing enough dealflow to focus on a niche. Per our Amsterdam poll, 50% of firms are taking a blended approach which means predominantly focusing on preferred categories but open to acquisitions outside the niche.
Another way to bring strategic focus to acquiring assets was to look beyond category or geography, and target assets by theme e.g. US supply chain or eco-focus.
How important was/is the brand founder to the brand’s future success?
- High 29%
- Medium 47%
- Low 24%
In recent quarters, we have seen a shift in structuring deals. One strategy is in-keeping with the PE model of retaining the founding team post-close. The pioneering eCommerce aggregators that rode the pandemic wave looked to migrate assets in their entirety to inhouse operations.
However, as operations and new product development have become a priority in recent quarters retaining the founding product expertise is imperative to sustaining growth.
As one aggregator stated in our Amsterdam event that its best performing brands are where it kept the founder for a year. Where founding teams remain, the earnout can be better structured thus diminishing the threat of a lawsuit further down the line.
Other Key Points Relating to Operations:
- Firms are looking to diversify their supply chain to other markets, lessening reliance on China which has dealt with new rounds of covid and disruption in recent months. EU based sourcing can be more efficient.
- While expanding into Direct-to-Consumer markets was a key goal for FBA aggregators, it is proving a more difficult feat.
- Consensus: Integrating enterprise analytic tools like Netsuite is difficult and a huge drain on a firm’s resources.
What are your Current goals for 2023?
- Hire more operations people
- Cost optimization – offload or kill non-core assets.
- Channel diversification ie. off-amazon.
- Become ‘IPO ready’
- Become cashflow positive
- Become EBITDA positive
- Raise more debt
- Be self-sustaining by end of 2023
As operations and efficiency are key goals for buyers, 2023 will take on a similar survival theme to 2022.
Is your firm currently in active discussions to acquire or be acquired?
- Yes 57%
- No 43%
In a year marked by survival, consolidation is inevitable. There is no consensus as to when rates will peak but it is expected to rise to 5.25% by Q3 2023 and preface a light recession/soft-landing. As rates are expected to hover between 4% and 5% through the end of 2024, and with the current outlook for growth, aggregators – that are presently struggling to service their debt – will view a merger as a viable option. However, with the current outlook strategic mergers of aggregators [MoA] is not relegated to only firms seeing signs of distress, as the 57% firms that respond “yes” suggests.
Mergers of Aggregators [MoA] will be a central theme at our exclusive day conference for eCommerce M&A in New York [June 8th]
Have You Signed Up?
This is a ticketed event exclusive to:
- C-suite and Heads of M&A at eCommerce aggregators.
- Senior associates at PE firms and strategics/corporates that acquire in the eCommerce space.
- Networking drinks reception in a local venue.
- Full day of networking, panel sessions, break-out roundtables, and keynotes on relevant themes in eCommerce M&A.
- Gourmet breakfast and lunch from Convene’s in-house chef.
Full event agenda to follow.
- Alex Urdea, Co-founder, Upper90
- Brian Harwitt, CoVenture
- Sakib Jamal, Crossbeam
- Anthony Johnson, Former CTO, Thrasio
- Joseph Falcao, Former CFO, Thrasio
- Mark Goldfinger, VP of Growth, unybrands
More to be announced.
Event Schedule: 8am – 5pm EST.
When: 8th June 2023.
Where: Convene, 101 Greenwich Street, Lower Manhattan, NY 10006.
Cost per person: €249 + Booking Fee [Limited availability].