Intro: experienced M & A Advisors for digitally native enterprises
by Chris Shipferling of Global Wired Advisors (GWA)
They usually have a strong background in investment banking
– High risk, complex world
– High stress
– You have to make large transactions
For The Amazon world the M & A Advisor would have a deeper experience compared to a broker. Having owned and sold a business does give you experience. But it doesn’t necessarily.
M & A is more thorough and you do a lot of research about the client’s business and how it
– private equity firm
– Global Family private office
– Family with wealth looking
– Corporate investors
– They go to trade shows – Around the world eg Germany, China, USA
– Identify corporate and strategic M & A arms or CFOs, CEOs
– What criteria?
– What kind of business are you looking to bolt on?
It has evolved in last 2 years
– Threshold was about $1M in revenue
– Threshold has now moved up
– reason: when putting business through process – investing banking process- it’s a good fit for amazon business owner and the
A broker tends to take a business of any size and blast it out to a list
– List procured over several lists
GWA have a more segmented list
– Often deals are not publicly shown
What leads valuation
– Risk versus return
– State of the industry
– Value is a communication point between seller and buyer
There are reasons for why it sits somewhere
– One is risk vs. Return
– The market in general looks at all businesses that are “small” eg $50M as small.
– That means it’s seen as higher risk because of size
– A lot of detail and
Where will this business be in 3 years time?
If you just list marketplaces this business could sell in, that’s a bit lazy.
Part of the prep is diving in and really painting the 3-year picture.
Chris had to present 3-year marketing plan for a middle market company
In other businesses, there was a large forecasting exercise where you went through everything
– they were defendable
– Offence and defence playbook
When speaking to private equity or family offices, you need that playbook
Self fulfilling prophecy in the Amazon space
It becomes a self-fulfilling thing because the brokers are selling at about 2.8-3X
But there hasn’t been a sophisticated analysis of why the businesses should be worth more.
Global Wired Advisors has pushed up the real multiples
The industry is developing. Buyers are looking for something professional
– Revenue per employee
– Discounted cashflow
– Effective cashflow (Seller Discretionary Earnings)
– Multiple is usually 3-4X multiple for Amazon
If you pressed a selling agent on how they came to that conclusion.
Recently sold a SaaS business – it was a very interesting business for a lot of acquirer
It got a 12X multiple because they got it positioned the right way
Another one achieved 8X multiple. This PE got the value.
In both cases, GWA gave guidance on valuation. But sophisticated cap guys know how to do valuations.
When you deal with those guys, the valuation are consistent.
– Amazon – 3-4X multiple is stable.
– A lot of it becomes a self-fulfilling prophecy if it’s listed for a multiple.
The highest to date for an Amazon business was about a 5X for a $30M business
The higher the EBITDA, the more you can get PE to bite harder even though it’s just on Amazon.
As the earnings from Amazon are published, that pushes it.
Amazon is $1.2Trillion market cap with 40X earnings.
Typical Amazon mulitiples are actually 2.6-2.8X multiple
– ecommerce can get more
For comparison: Average CPG multiple is 7-13X
Find out more in a detailed chat about where your business is at.
Lots of resources as well – one digital marketing firm that has been vetted by them and trusted by them.
Amazon consulting firms etc.
Happy to share those resources on a consultation call.
How to choose a broker for your business
– There are great brokers out there who do a decent job
– If someone has a specific goal to speak to those
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