WHO ARE THE AMAZON FBA ACQUIRERS? PROFILES OF SOME OF THE BIGGEST NAMES IN THE SPACE
Unless you’ve been living under a rock you would have heard about the incredible things happening in the M&A market for Amazon FBA businesses. More than $3.6Bn in capital has been raised by more than 50 new firms to acquire these e-commerce businesses. Hundreds of acquisitions have been made already, with more – and larger – acquisitions in the pipeline in future. Before 2021 is out we will likely see the first public listing of at least one of these acquirers, and possibly as many as three of them.
We thought it would be valuable to provide a little insight into some of the key players in the market, and the interesting elements that differentiate them. From famous founders to Y-Combinator participants, there are a lot of characters on the Amazon M&A stage.
An early Thrasio team photo. The firm now has almost 800 staff
It would seem amiss not to start this post with Thrasio, the innovator of the Amazon FBA roll-up model and the firm who has raised the most funding to date. While not the first in this space (101 Commerce holds that credit, and Goja who acquired them should be counted next), Thrasio was undoubtedly the first to make the model work at scale. It was arguably Thrasio’s Series C announcement in July 2020 that opened the floodgates of this market and attracted so much interest, and competition. The Boston-based firm has made the largest number of acquisitions and has expanded internationally at the fastest rate, opening offices in the UK, Germany, China and most recently Japan. Thrasio also has a team of almost 800 people, and a track record of making earnout payments, which in this new space, is still theoretical for many. The firm has stated that they expect to be the first to go public, and analysts expect such a listing (either via a traditional IPO or a SPAC) to happen in 2021.
One acquirer of a different kind is already a public company: Mohawk Group (NASDAQ: MWK) is making wall street headlines with its unique business model. The Google Ventures-backed tech company went public via IPO in 2019 based on its proprietary software and agile supply chain, which optimises the operations of the businesses it powers: Amazon FBA consumer products businesses. While the firm launches many of its own brands in-house, since late 2020 Mohawk has been on an acquisition spree, targeting large Amazon FBA businesses that its platform can optimise to drive further growth. Also as a public company Mohawk can use its stock rather than cash for acquisitions.
And while Mohawk and Thrasio have built impressive operations in a very short space of time, there are some others who have even more experience in this space. Berlin Brands Group, which has in its own right allocated more than $0.5Bn to acquisitions, was an operator well before becoming an acquirer: the firm has been running Amazon brands for 15 years, an eternity in this fast-moving ecosystem. Now that acquisitions are on its radar the business is aiming to grow at a rate of one acquisition “per week”, an astonishing pace. With a presence on all of the many European marketplaces other than Amazon, BBG is able to leverage its reach to grow the brands it acquires arguably more rapidly than those who are currently focused only on Amazon. The firm boasts other differences too: for example, while some acquirers shy away from electronics, BBG has a long history in the category and can take a more nuanced view on electronics acquisitions.
Austin, Texas based Elevate Brands also sees itself as an operator first, acquirer second. Selling on Amazon since 2016, the firm has operated every Amazon business model from retail arbitrage to wholesale reselling. Now firmly focused on private label, Elevate has significant experience not only in buying but operating private label brands (for example growing one from zero to 7 figures in 90 days). While Amazon is its focus, the company is building significant DTC and off-Amazon expertise because it believes these channels are where it will be able to “elevate” brands even further in future.
Berlin Brands Group, led by Peter Chaljawski and Dominik Brichta
UK-based Olsam Group are also operators at heart, having built and sold their own private label Amazon FBA business in the past. Besides operating FBA businesses, experience working inside Amazon is also a useful advantage. Key people at Olsam, including cofounder Sam Horbye, have extensive experience working for Amazon in its Marketplaces division, and Sam helped Amazon to launch the Amazon Business division in Europe. This makes Olsam particularly adept at utilising B2B sales as a growth lever, which can give Olsam an advantage in growing certain brands.
One of the earliest and largest aggregators in this space, Boston-based Perch also differentiates itself on its operational expertise. With a founding team steeped in e-commerce supply-chain knowledge (one of the more difficult pieces in the e-commerce puzzle), Perch has become known for its appetite for larger and more operationally complex businesses. With 30 acquisitions to date and the stated intention to match BBG’s goal of one acquisition per week in 2021, the company is growing extremely fast.
Paris and NY based Branded grew to $150m in revenue, entirely by acquisition, while in stealth mode, before announcing its existence to the public. Branded is led by Pierre Poignant, a very experienced e-commerce operator whose past successes include cofounding Lazada, the Rocket Internet backed southeast Asian marketplace which sold to Alibaba for more than $3Bn, as well as Michael Ronen, previously a US managing partner at SoftBank’s Vision Fund.
Malte Horeyseck and Philipp Triebel, Co-Founders of SellerX
Pierre Poignant, CEO and Co-Founder of Branded
Poignant is not the only “heavy hitter” in this space – some other well-known entrepreneurs are behind Amazon FBA acquirers. Boosted Commerce was co-founded by Charlie Chanaratsopon, the founder of the Charming Charlie retail chain which he built to 350 stores and $550m in sales. Boosted has a unique interest in sustainability and has partnered with NRF, the global food manufacturer known for its carbon-neutral approach and sustainable supply chain. While some acquirers are apprehensive about making acquisitions in the food & beverage, healthcare and supplements categories, Boosted’s experience in these sectors means it can take advantage of opportunities there. The firm will seek to not only grow the businesses it acquires, but improve the sustainability of their operations through its NRF joint venture.
Speaking of well-known founders, Suma Brands counts Matt Salzburg, cofounder of Blue Apron, as one of its founding team. With consumer retail experience that extends beyond e-commerce (CEO Andrew Savage is from Target), the Suma team are looking to acquire brands that they will grow not only online but eventually in brick & mortar retail. Thinking this far ahead means viewing e-commerce as only a small piece of a much larger consumer retail puzzle, where Amazon is the ideal launching pad but is far from the endgame. In this worldview, brand is central.
All of the acquiring firms understand branding of course. But in the Amazon ecosystem, where brand appears less important to success than other factors like the “three Rs” (ranking, ratings & reviews), choosing to focus on acquisitions with particularly strong brands means being more selective. In a seller’s market, where competition for acquisitions is fierce and deal origination is hard, saying “no” based on brand is particularly difficult. But several acquirers – including one still in stealth mode – have told us that they are doing exactly this.
Matt Salzburg, Co-Founder of Suma Brands
One of the largest acquirers in terms of funds raised, Heyday has a strong belief in the importance of brand. Focusing only on brands that can become household names, the company is willing to say “no” far more times than it says “yes”, in order to find businesses that have this potential. Interestingly, Heyday is open not only to acquiring these brands, but to investing behind and incubating them. The firm wants to back the next great digitally native brands, and will partner with entrepreneurs to do it. As Heyday puts it, they are not looking to acquire 100 brands (a reference to some others in this space); rather, Heyday is looking to incubate and acquire brands that it can grow to $100m in revenue.
Another FBA acquirer known for its more selective approach to acquisitions is Boston-based Dragonfly, which focuses on buying firms that have particularly strong barriers to entry. Successful Amazon sellers can demonstrate a number of barriers to competition on the platform – trademark protection, Amazon’s Brand Registry, best seller rankings and high review counts all help to reinforce the success of the “winners” on the platform and make these businesses attractive acquisition targets. But Dragonfly looks beyond these to find longer term defensibility in the form of patents, or unique and hard to imitate complexity in operations, for example.
Sebastian Rymarz, CEO and Cofounder of Heyday
Ohio-based EnCapA has an interesting acquisition model, and if all goes to plan for the firm, it might actually beat Thrasio to be the first acquirer to list publicly, despite being much smaller. With extensive founder expertise in rolling-up brands in other sectors and exiting via IPO, the EnCapA team are using a similar approach to Amazon businesses. Their model involves purchasing a number of Amazon FBA businesses simultaneously, and then shortly afterwards selling to a 3rd party purchaser or even taking the combined entity public via a SPAC. This allows EnCapA to offer a high multiple to sellers, all up-front at deal closing. In order to achieve this sophisticated manoeuvre, the company will make agreements with each seller that amount to an option to purchase, to be executed several months later. This innovative model has raised eyebrows and sparked a lot of conversation in the Amazon FBA ecosystem, which can only be a good thing for EnCapA.
Another acquirer beating a different path is NY and Toronto-based Moonshot Brands, which is currently going through Y-Combinator, the Silicon Valley incubator programme that launched AirBnB, Stripe and many others. Moonshot is led by two serial entrepreneurs, both of whom have had large exits in the past. Co-founder Allan Fisch has extensive experience in the home décor e-commerce space (notable for the logistics challenges it entails), so Moonshot doesn’t shy away from this category. It will be fascinating to see how the Y-Combinator programme accelerates Moonshot’s growth.
Besides these acquirers there are many more. Razor Group and Heroes are two notable examples of well-funded acquirers who are very active on both sides of the Atlantic. At Hahnbeck we know and work with all of the key acquirers in this space, including some still in stealth mode, from Singapore to Japan to Israel. Each one has unique preferences, different perspectives and can offer different opportunities to the seller.
Not all are equal. For sellers it is important to weigh up not only the terms of the deal, but the firm offering the deal. We’ve seen some prominent acquirers (not the ones mentioned above) make claims they were not able to back up in due diligence, letting down the seller. Some others are highly reputable and very well funded, but don’t disclose their funding and fly “under the radar”.
Deal terms vary also. The highest total multiples always include an earnout component, and here it is also worth weighing up not only the amount, but the structure of the earnout – as well as the operational capacity of the acquirer and their likelihood of actually growing the business during their ownership. For sellers who are particularly risk averse, several of the acquirers will structure deals with 100% cash at closing, in exchange for a lower total consideration. There are many other variables, and it helps enormously to have someone on your side with knowledge and experience in all of this, to help you through these negotiations and get the best deal. That’s why Hahnbeck is the most sought after M&A consultancy (brokerage) in this space.
If you have a large Amazon business and you would like advice on your exit options, we would be happy to help. Just email us at info@hahnbeck.com and we’ll get back to you right away.