What are aggregators looking for when they acquire a business, and what you can do to attract their attention?
You’ve harnessed your passion and come up with a great concept. You’ve got your business up and running, and proven that you have what it takes to manage a company. You’ve developed a following for your brand and generated a respectable amount of sales. Now what? If you’re like many private label founders, you’re probably drowning in supply chain logistics, struggling to boost your digital marketing, and juggling a plethora of operational issues. You probably have very little time to think about your product or service, the passion that got you started on this journey in the first place. You may even be wondering—what have you gotten yourself into? Where is this headed?
You’re not alone. Most successful entrepreneurs reach a natural inflection point at which their bootstrap strategies are no longer effective or sustainable. Many start to look for other options to achieve a high-growth future, and in today’s market, that often leads them to consider selling their brand to an e-commerce aggregator.
Could your company be relevant to an e-commerce aggregator? These are some of the things that leading aggregators consider when selecting companies to acquire.
Aggregators are interested in brand traction, so the majority will only buy private labels with unique products, not resellers or wholesalers. In some cases, aggregators may be willing to look at exclusive resellers with robust long-term contracts with brand owners, but in most cases, they stick with private labels.
Certain product categories really took off during the pandemic, and it’s no surprise that those are the categories that are attractive e-commerce aggregators. Those categories include everything related to lifestyle, wellness and health, and home improvement, which are also some of the most popular categories overall on Amazon and Shopify. It makes sense that aggregators are focusing their efforts in those fields—most products in these categories are evergreen, don’t have short expiration dates or complicated storage requirements, and they aren’t heavily regulated.
Some aggregators don’t exclude any type of product, but those who do often avoid the fashion, toys, and electronics industries due to the need for constant updates and innovation. Fashion in particular also tends to be dominated by a handful of strong global brands, making it harder for new brands to break into the market. Other aggregators stay away from supplements, food, and cosmetics since they often have strict regulatory guidelines that vary greatly from country to country, as well as short shelf lives.
There are no strict rules here, but there is a sweet spot that seems to be what many aggregators are looking for. Aggregators want businesses that have the potential to grow quickly. On one hand, they don’t want to take unnecessary risks, so they want a business that has been around long enough to prove that there is a market for its product. On the other hand, they’re looking for untapped potential that they can capitalize on, which in most cases means a business that is fairly new and has a lot of room to grow. In most cases, businesses that have a history of 1-2 years are ideal, although many aggregators may be willing to consider brands that have been active for long periods of time if they can prove that they are far from their peak.
The best way to prepare your business for sale to an aggregator is to start thinking like one. If your company is in line with the topics detailed above, prepare documentation that shows how much your company has accomplished so far, and the current barriers to further growth that could be overcome by an aggregator. For example, if you’re currently only selling in the US, show the global market potential that could be tapped into by an aggregator with global fulfillment and logistics capabilities, as well as an international marketing and advertising team. Explain what differentiates your offering from your competitors, and how your loyal customer base reduces risk. Most importantly, always remember that aggregators are interested in quick growth, so focus on finding a balance between showing what you’ve got, and showing where there is still significant room for growth that hasn’t yet been achieved.
And if one aggregator turns you down, don’t give up! Do your homework, and keep looking for an aggregator that’s a good match for your business. It’s a hot market, and high-potential private labels often earn profits far above their future potential revenue when they are acquired by an aggregator.
In the meantime, if you’re still building your business and being acquired by an aggregator is still a long way off, you may want to look into how Payoneer can help you grow your business until you’re ready. From multi-currency receiving accounts to working capital, Payoneer offers a range of tools and products to help you realize your business’s potential.