Amazon Aggregators See Deal Flow Dip in Q1

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Amazon aggregators have seen massive investment and deal flow since 2020, but the volume of activity has been slowing as the valuations of top sellers has increased, according to a report on M&A activity in the sector from investment banking firm Capstone Partners.

The rapid expansion of Amazon’s marketplace, the growth of third-party sellers and the flow of funding into the legions of Amazon aggregators have all led to a surging market for brands selling through Amazon FBA, Capstone reported.

However, there were just 30 acquisitions of major FBA brands in the first quarter of 2022, compared to 159 in all of 2021, based on data from Capital IQ, FactSet, PitchBook and Capstone.

In 2021, 60,000 sellers registered more than $1 million in sales on Amazon’s marketplace, with 3,000 of them hitting over $10 million in sales, according to data from Marketplace Pulse.

As of March 2022, Amazon aggregators have raised $14.8 billion in capital since the start of 2020, while 3P sellers reached $390 billion in 2021 GMV, representing 65% of the total, also according to Marketplace Pulse.

In 2021, 32 of the 96 active Amazon aggregators raised at least $100 million in funding to fuel more acquisitions, with the upper tier raising more than $1 billion, demonstrating the ease of capital access, Capstone reported. All of this drove up valuations for top sellers.

“Many of these large-scale consolidators have built an expansive portfolio of FBA and other marketplace companies, establishing significant pricing power and creating barriers to entry for individual brands,” noted report author Lisa Tolliver, a managing director of Capstone.

Regarding the dialed-back deal flow of ecommerce brand M&A, the report noted that aggregators are getting more selective in their acquisition targets as valuations have risen.

“Heightened focus has been placed on brand and product alignment, along with increased due diligence of financial performance to ensure an optimal return on investment,” Tolliver wrote. “Brand appeal and channel expansion have been key focus points among buyers to scale the reach of portfolio holdings.”

Based again on Marketplace Pulse data, the top aggregators in terms of capital raised to date were Thrasio, at $3.4 billion, followed by Berlin Brands ($1.3 billion), Perch ($908 million), Heyday and SellerX ($800+ million) and Elevate Brands and Razor Group ($600+ million).

“With capital continuing to flow towards these market participants, acquisition activity is expected to remain healthy in the near term,” Tolliver wrote.