Amazon store successfully cashed out 13 million! What capital acquisition routines did the seller experience?

"Your bank account ***** has been successfully transferred to 1*** million yuan." After receiving the text message, an Amazon seller from North China finally breathed a sigh of relief.

Not long ago, this seller from North China sold a sports brand D on his Amazon platform to investors, intending to use the cash to invest in his other product lines. But this process was much more difficult than he imagined...

In the current "acquisition wave" driven by capital targeting Amazon's third-party premium stores , more than 40 domestic and overseas companies, with over 10 billion US dollars in consortiums, have targeted third-party sellers on the Amazon platform. According to industry analysts, the current acquisition wave is in its bonus period, but with the changes in platform rules, capital's requirements for Chinese projects are getting higher and higher.

Perhaps you have received an "olive branch" from capital before , but the business opportunities that seem to be within reach often contain some risks and challenges. From the involvement of investors to the completion of the acquisition, the entire process is complex and involves many professional fields, including early asset valuation, market bidding, price negotiation, mid-term due diligence, acquisition contract negotiation, and later asset transfer and account migration. Without comprehensive knowledge reserves and operational experience, it is easy to make mistakes in some links, causing losses to the seller.

Three pitfalls that investors must be aware of when acquiring Amazon stores

The acquisition business between sellers and capital is not always as smooth as reported in the market. Many sellers have fallen into the following pitfalls in the process of connecting with capital:

Pitfall 1: Grabbing projects at inflated prices

Without knowing the seller's brand in detail, the investor gives a blank check, quotes an inflated price, and snatches the project with a bid of 5-10 times the annual profit. After that, the investor can conduct exclusive due diligence on the seller.

Some investors even give a letter of intent without communicating with the seller. However, a letter of intent does not represent the investor's final acquisition intention and price. After the due diligence is completed, the initiative of whether the project can be sold at the intended price is in the hands of the investor. For sellers who have no transaction experience, the whole process seems very passive.

Pitfall 2: Using delaying tactics during due diligence to disrupt operational rhythm

Some investors claimed that they could complete due diligence within 45 days, but in the end they were unable to do so within 75 days, causing the transaction process to be extended indefinitely and disrupting the seller's normal operating rhythm. Some investors with a good reputation in China seemed to have done a lot of market promotion and sufficient team layout, but it is understood that there are very few projects on which the investors can successfully complete the transaction as scheduled.

The reason is:

1. Some investors bid inflated prices to win multiple projects at the same time, and conduct due diligence on multiple projects at the same time, which causes the internal team of the investor to be distracted and unable to complete the due diligence as promised.

2. The core team of the investor's due diligence and final acquisition decision is all overseas. Due to differences in time zone, language, culture, etc., the seller has great difficulties in communicating with the investor.

3. Some investors try to consume the seller's patience and energy by prolonging the battle and avoiding communication, in preparation for lowering the price later.

4. Some due diligence teams of investors lack experience in cross-border operations related to Amazon and lack professionalism in the direction and focus of the investigation.

Pitfall 3: Using various reasons to lower the price before signing the acquisition agreement

According to the seller in North China mentioned at the beginning of the article, he started selling Brand D in 2018 and originally planned to invest the cash from selling Brand D into other brands. Among many interested investors, he chose the one with the highest bid. After two months of due diligence, the investor maliciously lowered the transaction price by 40% on the grounds that the profit decreased due to the increase in logistics costs during the due diligence period, causing the seller to give up the deal with the investor.

How does this kind of investor operate? Without the approval of the investment committee, the investor's acquisition team sends a mass email to the seller, offering an attractive high price and claiming that the transaction can be completed quickly. At this time, the seller must not cooperate with other investors within the time specified in the letter of intent.

After circling the seller, the investor will find reasons to delay the due diligence or deliberately delay the investigation progress. After 2-3 months, the investor will use various reasons to lower the final transaction price or even withdraw from the transaction, causing the seller's time and manpower costs spent in the due diligence process to go to waste.

The seller made amends through the M&A consulting company FBAFlipper. As the earliest company engaged in Amazon e-commerce M&A consulting in China, FBAFlipper has contacted and cooperated with all mainstream investors in the market. Its team members have rich M&A experience, are familiar with the transaction processes of various investors, and have the resources of multiple bidding investors. Neo, the head of FBAFlipper, said: "We have cooperated with almost all the mainstream investors in the market. We know clearly which one is better and which one is worse, whether it is sincere to buy or intentionally freeloading." " The seller in North China contacted us in April this year and expressed his intention to sell the project. However, the whole acquisition process was tortuous. The seller encountered many difficulties in the due diligence process, and when it was almost completed, the first investor unreasonably lowered the price by 40%. The seller could not accept the investor's bargaining and decided to terminate the transaction with the investor. So, we immediately helped him connect with another investor we are very familiar with, and finally helped him complete the acquisition at the price he expected in his heart." Neo said.

The project was revived and the seller received the due transaction amount - the overall transaction amount was US$2 million, equivalent to RMB 13 million.

On September 10, the seller’s bank account received 85% of the down payment, US$1.7 million, which was transferred to two accounts of the seller. The remaining 15% will be collected in six months.

(Screenshot of part of the payment received by the seller after the transaction was completed)

The seller said: "I really can't imagine how badly we would have been cheated by the investors who lowered the price without the help of FBAFlipper. The professionalism of the FBAFlipper team played a huge role in the entire acquisition process. With the existing energy and resources of our company, we simply cannot complete all aspects of the acquisition process alone. Without the help of the M&A consulting company, we would not have been able to sell the store at an ideal price."

The total amount exceeds 100 million US dollars, which creates a win-win situation for capital and sellers!

Looking back, this wave of "acquisitions" between capital and sellers is an important springboard for sellers to break through existing development bottlenecks with capital, or to increase cash flow and deploy diversified channels; for capital, it is a shortcut to accelerate the penetration of the cross-border e-commerce industry.

But how can we solve the problem between the two so that they can complement each other and achieve a win-win situation?

From the perspective of Amazon sellers, domestic sellers do not know the definition and measurement criteria of high-quality Amazon brands by investors, and are unable to present their brands to investors in a perfect manner.

From the perspective of foreign investors, when foreign companies enter China and acquire Chinese e-commerce companies, they also face the challenges of acclimatization caused by cultural conflicts and are unable to screen out truly high-quality Amazon brands.

As we all know, the operating style of Chinese Amazon sellers is completely different from that of foreign sellers. Therefore, many operating methods that are relatively innovative in the eyes of domestic sellers may increase account risks and become acquisition obstacles for some investors, including some very excellent domestic Amazon brands.

Due to misunderstandings caused by cultural differences, some excellent brands have missed the opportunity to go overseas, which is a pity, according to Neo, head of M&A consulting firm FBA Flipper.

If there is a consulting company that can build a bridge of communication between investors and sellers, will such mistakes be reduced? As a consulting company with rich industry experience, FBAFlipper's team includes many senior people and overseas Chinese in the United States who are well versed in the cultural differences between China and the West and the industry rules of Amazon. They can not only help sellers to build a bridge of communication with investors in all aspects of the acquisition, avoid the risks that may be encountered in the acquisition process and the huge pitfalls buried by investors, but also know how to present the domestic Amazon brand to the corresponding matching investors in a perfect appearance.

( FBAFlipper team member)

According to statistics, as the earliest professional team engaged in Amazon e-commerce M&A consulting in China, even 6 months earlier than most capital entered China , FBAFlipper completed more than 80% of the transactions in the Chinese market, with a total of 17 transaction projects, including 4 projects with a value of more than 10 million US dollars, and a total transaction value of more than 100 million US dollars. The professional services and transaction-facilitation capabilities of the FBAFlipper team have been well received by customers.

At the end of the article, FBAFlipper also wants to remind sellers that although mergers and acquisitions are a shortcut to quickly obtain cash flow, sellers must also keep their eyes open and use professional consulting companies to identify the "freeloaders" in the market.

Amazon sellers that meet the M&A conditions often need to have the following characteristics:

( Photo courtesy of FBAFlipper)

If you also want to learn more about the M&A industry and seek capital connection, you may add WeChat to contact FBAFlipper: Cheung9305 or rahile24 to quickly obtain brand valuation.

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