It seems like the top headlines are about how aggregators are pouring unlimited buckets of money into buying brands on Amazon. That is the simplified message that we see repeatedly, and it’s a fun story to read. However, the nuance of which brands sell to aggregators and which are passed over is not often discussed. As a brand owner who would like to eventually exit, you need to know what aggregators are searching for right now.
We recently talked about the actual state of the aggregator market with Taliesen Hollywood, sharing what the true average multiple is and talking about the perceived “frenzy” of buying by aggregators. If you don’t have time to review that article and interview, the short answer is that the frenzy is over. Some aggregators have paused new acquisitions, while others are only pursuing brands that fit their narrow strategy.
As the market becomes more balanced and sellers become more selective, the question is: How can I make my brand stand out?
What Aggregators Are Searching for Right Now
If you are preparing for an exit within the next twelve months, you need to understand what aggregators are seeking now. Here is a shortlist that we have compiled from discussions with aggregators, recent sellers, and brokers:
1. Aggregators want a company that fits with their strategy
The information on what types of brands particular aggregators are seeking is publicly available on aggregator websites, in interviews we have done with aggregators, and more. Additionally, a good broker or consultant will have connected with the key players in the aggregator world and discussed strategy.
Here is a quick and easy way you can utilize aggregator strategy right now – as you plan for an exit:
- Find aggregators that are looking for brands in your product category.
- Look for interviews with these aggregators and see if they drill down into specifics.
- Modify your business to fit with the publicly stated strategies.
It could be that your brand fits into a particular aggregator’s strategy as-is or that you need to simplify, increase profitability, clear up IP issues, and more before making your amazing exit. This simple research can help you determine next steps.
2. Aggregators are seeking brands that have their financials in order.
We have talked about getting financials in order repeatedly, and there is a reason for it. Aggregators are looking for companies with clear financials so they can prove profitability. If your business is not profitable or is on the downswing, an aggregator wants to know before buying. Frankly, you need to know this information as well, just as a business owner. If you haven’t had your finances reviewed by a qualified bookkeeper, get your information organized now so you can present clear financials to an aggregator – or so that you can make plans for a future exit.
3. Aggregators want brands with straightforward IP and patent documentation.
An aggregator will do due diligence to ensure your IP is on the up and up. They are unlikely to buy a brand if it looks like Amazon may be able to kick the brand off the platform at any moment for intellectual property violations. Make sure this information is well documented both for the sale of your business and for your protection as a brand owner.
4. Aggregators are looking for companies that will simplify the transfer of ownership.
Make sure your company is easy to transfer. This includes doing steps two and three above and making yourself aware of any minor snags that can happen during transfer.
For example, one of our interviewees found out that because he built his brand in his personal Amazon account, all of his personal Amazon purchases and purchase history left with the brand he sold. This is just a slight snag in a multi-million dollar deal, so he decided just to let it go. But, it’s something that may have been avoidable if he had known about the issue in advance of the sale.
Another example is that a standard aggregator purchase agreement (an asset purchase agreement) has expensive tax implications in the UK. If you are working from the UK or are selling in the UK, you may want to research the tax implications before selling. You can keep this in your back pocket and discuss it with an aggregator during the negotiation process.
5. Aggregators want brands with new products fully mapped out and ready for launch.
You may not want to launch a new product because you may lower your profit margin as you spend more getting the latest product off the ground. However, having new products in the pipeline, fully designed with the supply chain worked out, makes your brand more desirable to an aggregator that would like to finance new product launches upon acquisition.
A Final Word of Advice
When you consider selling your brand, the first and simplest thing to do is look at your company as a whole and think about what you would need to know to buy it. In other words, if you were buying your business, what information would you want clarity on before moving forward? Address those issues before pursuing a sale.
If you are considering exiting your brand this year, get in touch with the Amazing Exits team. We are offering a free initial exit strategy consultation. Schedule yours here.
Additionally, if you will be attending the Prosper Show, schedule a sitdown with Paul Miller. You can book a time to talk here.