Updated: Apr 15, 2021
The recent surge in e-commerce has generated increased interest in online and Amazon-based businesses; consequently, an influx of capital into the space has created innumerable opportunities for entrepreneurs to achieve their ideal exit.
During a recent transaction involving a direct-to-consumer e-commerce business, our firm received 10 separate offers from private equity investors. These companies are highly desirable, and acquirers are eager to negotiate for the right deal.
We’ve also seen new capital flowing into the Amazon space. Businesses that were once viewed as risky investments are now being evaluated as stable and immensely valuable assets. Aggregators, private equity, and strategic acquirers are willing to pay a premium for well-established brands.
There is plenty of money to be had – over $3 billion has been raised in the space, with $1.2 trillion in dry powder across all private equity and corporate balance sheets.
Achieving Your Ideal Exit
Although the landscape of opportunity is increasing, so are the complexities of navigating an 8-figure M&A transaction. Acquirers have tremendous amounts of capital at their disposal but the firms they represent expect strong returns on their investment.
Investor criteria is rapidly evolving, necessitating a professional approach to secure the maximum value for your business. We’ve compiled the following tips to help you navigate the business sales process and achieve your ideal exit.
Don’t Sell Direct
Solo sellers are immediately placed at a disadvantage. FBA aggregators, private equity funds, and strategic acquirers will all tell you they can push the deal through quickly. However, selling directly to an acquirer can severely damage your deal.
High value M&A transactions in the $10-50 million range are complex and nuanced. They require an advanced skillset to manage and achieve a positive outcome, a skillset that most entrepreneurs simply do not possess.
Unless you have a background in Investment Banking and know what to look for, you could be leaving hundreds of thousands or even millions of dollars on the table. You cannot trust an acquirer to provide you with an accurate valuation; they will take advantage if you let them.
Retain a Qualified Intermediary
Working with an experienced M&A professional ensures you are getting the most for the valuable asset you’ve built. Be selective when choosing an intermediary, as sub-par representation can lead you to settle for less than you deserve.
A proper M&A transaction requires a sophisticated approach. An experienced Investment Banking professional will guide you through each stage of the process – from creating high caliber marketing materials to conducting a thorough due diligence.
Moreover, an Investment Banker is a stakeholder with a partner-led firm. They have credibility with investors and can bring considerable resources to bear, including attorneys, market research, and an internal deal team comprised of Investment Banking professionals. Advanced preparation and institutional acumen yield the optimal outcome.
Build Your Business to Sell
Online companies with sustained upward growth trajectories are highly sought after. Thus, it is important to continually pursue short-term growth initiatives while preparing your business so that it is attractive to prospective acquirers, even after you go to market.
Your intermediary will manage every aspect of the deal, empowering you to focus on running the day-to-day operations. Take advantage of every opportunity to grow the business and drive a higher valuation whenever possible.
The best time to sell your business is while it’s performing well, and as the founder you are integral to its success. It is imperative that you maintain focus so that the business does not stagnate or slip into a decline just as you are attempting to exit.
Maintain Your Competitive Advantage
Direct-to-consumer and Amazon FBA businesses are in high demand. As investor criteria becomes more selective, it will become increasingly important to stand out from other sellers in the space. This is where professional representation is critical.
Your intermediary will convey your company’s strengths and growth opportunities to a shortlist of sophisticated private equity, venture capital, and strategic acquirers. The offering materials should encapsulate everything that makes your business unique – and valuable.
There are many strategies you can deploy in the short term to benefit your business that will also distinguish and bolster the foundation of your business. Here are just a few things investors look for:
· Product diversification
· Multiple well-established sales channels
· Optimized sourcing and logistics infrastructure
· Easily replicable / scalable SOPs
Forecast Future Growth Opportunities
Acquirers are looking for businesses they can continue to expand and scale. Growth initiatives, whether in process or slated to launch at a later date, are an important part of securing investors’ interest.
Highlight any opportunity for an acquirer to drive short-term growth by investing additional capital or onboarding the right team of experts. This is an excellent way to distinguish your business from others on the market and can add value to the transaction.
A section of the offering materials will describe each opportunity in detail, and your intermediary will leverage the future potential of your business to help you secure the maximum value and achieve your ideal exit.
Securing Your Financial Future
When considering a sale of your most valuable asset, you can’t afford to leave anything to chance. Advanced preparation is the key to a successful M&A transaction, but more importantly, process dictates the outcome.
By selling direct or engaging with an inferior intermediary, you risk leaving money on the table and / or damaging your deal irreparably.
This is why we always recommend that you work with a qualified Investment Banking professional who can guide you through each stage of the process, protecting your best interests and ensuring you walk away from the transaction completely satisfied.
A sophisticated approach yields the maximum value, securing your financial future so that you can pursue what comes next.
About the Author
Chris Shipferling is a managing partner at Global Wired Advisors, an M&A Investment Bank headquartered in Charlotte, North Carolina. Chris oversees business development and serves as the firm’s liaison with prospective clients, drawing on his 20+ years of corporate executive and institutional investing experience to help business owners successfully exit their online or digitally native businesses.