More Investors Will Be Buying Small E-Commerce CompaniesBack to home
Yesterday I predicted that we’ll see a record number of e-commerce businesses sold this year. I shared why I think the timing is opportune for many founders to sell. A friend pointed out that it takes two sides to complete a transaction and my post didn’t address the buy side. He’s right.
I believe significantly more buyers will be looking to acquire e-commerce businesses doing less than $10 million in annual revenue. Here are my reasons:
- The pandemic accelerated the shift to e-ecommerce, and this trend will continue. Buyers who want to participate in this trend but don’t want to spend time catching up and building something from scratch will be interested in buying a business.
- We’re in a low-interest-rate environment. Cash is earning nearly nothing, as are savings accounts and other risk-free investments, so people are looking for other investments to earn returns on their money.
- Many other asset classes have appreciated significantly in the last year and a half. We’re at peak prices historically for many asset classes, and some investors aren’t sure how much upside appreciation is left. Multiples on businesses have increased as well, but a small business in a large market that’s growing quickly has the potential to appreciate significantly.
- Finally, sophisticated investors are raising large sums of money to buy these businesses.
E-commerce businesses have historically been viewed as less sexy than other types of businesses and have received low multiples. I think that will change this year!