- So-called Amazon aggregators are buying multiple third-party merchants.
- The majority of buyers said they will pay anything for these businesses, a new survey found.
- Many said they are interested in buying companies with only one year of operating history.
Acquisitions of third-party sellers on Amazon’s giant online marketplace are expected to surge next year, with more than 1,000 merchants estimated to be snapped up by so-called aggregators. The dealmaking is so frenzied that many buyers say they will pay anything for these businesses.
That’s according to a recent survey by Fortunet, a firm that helps facilitate deals between the acquirers, known as Amazon aggregators, and merchants. The survey, conducted in June, asked 42 aggregators a variety of questions, including preferred seller profiles, popular seller categories, and ideal profit margins of targets.
The findings give a comprehensive look at Amazon aggregators, which have gained major traction in recent years. Given most aggregators just finished raising more capital, a surge in transactions is expected in the coming year, according to Juozas Kaziukėnas, CEO of Marketplace Pulse, who helped Fortunet complete the survey.
“Most aggregators didn’t exist before 2020, and further, they only raised capital over the past 12 months. That capital is only getting deployed now. There will be more acquisitions next year compared to 2021,” Kaziukėnas said.
Here are the key findings from the survey:
- More growth to come: The number of acquisitions is expected to top 1,000 next year. The majority of the aggregators intend to purchase more than 15 businesses in the next 12 months.
- It’s still early: Most deals so far have come from about 18% of the aggregators. Many aggregators have not made any acquisitions yet or have made very few.
- No upper limit to price tag: Fifty-three percent of the buyers said they do not have an upper limit for their price offers. Others have maximum purchase prices that range from $500,000 to $30 million.
- Most popular product categories: Buyers prefer product categories that are easy to operate and don’t face huge regulatory requirements, such as home and garden, pet supplies, baby products, outdoors gear, and personal care.
- Less attractive product categories: Buyers find these categories less appealing: toys, apparel, electronics, supplements, food, and fashion.
- Amazon’s marketplace matters the most: Most aggregators said they won’t assign higher valuations to merchants that sell through additional channels, such as Shopify, Walmart, and eBay. Some buyers said they would if the sellers get significant sales from those other marketplaces.
- Build to sell: Many buyers are open to buying young companies, with 46% saying they require a minimum operating history of just one year.
- Profit margin: Over half of the buyers said they require merchants to generate profit margins of at least 15%.
- Deal structure: Most buyers offer 70% to 80% cash up front, with an earn-out clause that requires the merchant to hit certain performance goals. And 61% of the buyers prefer to do a full acquisition.