Acquired at 8 times valuation, Amazon stores are still in high demand

In the past two years, e-commerce has developed rapidly. Not only has the number of sellers increased, but the store acquisition boom has also risen, and the valuation of sellers has doubled. According to research by Marketplace Pulse, an investigation agency , Amazon's own-brand sellers are being acquired at 4 to 8 times their SDE (seller disposable income).

Especially this year, the popularity of store acquisitions has not diminished. Some sellers have been deeply hurt by Amazon and have considered leaving the market. Although they are reluctant to give up their hard-earned stores, they still make a profit if they can sell them at a good price. In addition, seeing the potential for future e-commerce development, many aggregators have stepped up their acquisition efforts. There was even news abroad that a Tesla would be given away for selling a store, which shows how popular sellers are.

In 2020, when there were very few buyers looking to acquire Amazon sellers, the concept of an acquisition seemed far-fetched. The average seller valuation at the time was only 2.5 to 3 times, and sellers were severely undervalued. Now the market is catching up.

For acquisitions, it is usually calculated as a multiple of the seller's disposable income. For example, a seller with $1 million in revenue and an SDE profit of $210,000 will usually receive a guaranteed payment of more than $1 million plus a surplus payment.

But the valuation is not calculated by simply multiplying SDE by a preset multiple. Fortune’s CEO said: “The transaction structure is now more complex, and not all businesses are valued the same. Categories, total profits and their trends, growth opportunities and competitive positions are the main differentiating factors in valuation. ”

For those building brand holding companies, the multiples paid are irrelevant, betting on being able to build a portfolio that will be worth several orders of magnitude more in the future. To fully understand the companies being acquired, buyers are now more cautious and investing in better due diligence, and current global supply chain issues have also caused some agreed deals to fall apart.

Among them, the most active buyers are Amazon aggregators. In addition to specialized brand acquirers, some well-known brands have also begun to join the ranks of acquiring Amazon stores. The team is growing, and they have raised a total of more than US$11 billion in financing in 2021.

The doubling of seller valuations reflects the maturity of the buyout industry over the past two years and is expected to continue to increase, but at a slower pace.

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