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Home > Amazing FBA > Selling your Amazon Business via M & A Advisors
Podcast: Amazing FBA
Episode:

Selling your Amazon Business via M & A Advisors
Category: Business
Duration: 00:32:36
Publish Date: 2020-06-12 00:00:46
Description: Business brokers vs M&A Advisors Intro: experienced M & A Advisors for digitally native enterprises by Chris Shipferling of Global Wired Advisors (GWA) What is the difference between a M& A Advisor as opposed to a business broker? 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. Who do M & A Advisors sell businesses to? 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? What kinds of businesses do you work with? 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 Broker vs M & A Advisor 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 Business valuation and Multiples What leads valuation - Risk versus return - State of the industry - Value is a communication point between seller and buyer How do you move the market from where it sits? 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 ROE Return on Equity or Risk vs Return analysis 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 Alternative ways to value business - Revenue per employee - Discounted cashflow - Effective cashflow (Seller Discretionary Earnings) - EBITDA - Multiple is usually 3-4X multiple for Amazon If you pressed a selling agent on how they came to that conclusion. Business valuation examples 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. Comparing multiples across industries - 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.
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