With frequent capital financing, is a wave of acquisitions of Amazon's third-party sellers coming?

Amazon third-party acquirer Elevate Brands announced on July 12 that it has raised $250 million to acquire third-party sellers on Amazon worldwide. Investors include Novel TMT, FJ Labs, SEA Chairman, etc. With this $250 million, the company's total financing this year has exceeded $317 million.

According to a new report from online M&A advisor FE International, e-commerce companies led the technology M&A market in the first half of 2021, with a significant increase in the number and value of Amazon's third-party sellers. The large number of Amazon third-party sellers has spawned an increasing number of Amazon third-party acquirers.

Companies like Elevate Brands that acquire and operate multiple smaller Amazon third-party sellers to achieve economies of scale are called brand aggregators, or “roll ups.”

Ryan Gnesin, CEO and founder of Elevate , said that Elevate is profitable and currently operates 25 brands and is in a stable state . Elevate Brands uses its global network to provide these brands with the ability to expand rapidly and achieve long-term growth. Throughout its investment and operation process, these brands have achieved an average growth rate of nearly 100 % after acquisition .

Elevate claims that during the brand acquisition process , it conducts a 360-degree assessment of the seller's business, including asking the seller relevant questions and assessing business and supply chain needs . The company uses a streamlined underwriting process that is completed within 30 days , creating a comfortable and smooth acquisition process for sellers and a profitable exit .

Unlike most brand aggregators, Elevate was originally a third-party seller on Amazon, and its store was shut down three times by Amazon while selling products on Amazon. In the process of solving these problems, Elevate accumulated a lot of experience and relevant knowledge, and eventually the company decided to apply the accumulated experience to more brands and acquire more brands through acquisition.

When talking about acquisition targets, Ryan Gnesin said, "We prefer companies with patents because they tend to be more differentiated." As for the acquisition price, Ryan Gnesin said that the acquisition valuation varies and may be as high as 5 times the company's EBITDA (earnings before interest, taxes, depreciation and amortization) or as low as 2.5 times, but on average it is about four times.

There are currently approximately 5 million third-party sellers on Amazon, with sales reaching nearly $300 billion in 2020, and Elevate estimates that this number will double in the next five years.

The huge market has brought a lot of investment. Thrasio, a veteran brand aggregator, has raised nearly $2 billion in debt and equity; Berlin Brand Group, which was established less than a year ago, has raised $400 million. As more and more similar companies and more and more financing are received, more sellers are expected to receive their invitations and face a choice: cash out or continue to work hard?

Amazon

Financing

E-commerce