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2020 Yearly eComm Business Sales Review

  • Is it a buyers’ or a sellers’ market?
  • What impact did COVID-19 have on the marketplace? 
  • What was the largest eCommerce business that sold this year? 
  • Where did the list price multiples reach?
  • Which niches are the most popular and which sell the quickest? 
  • All these questions and more will be answered in our 2020 Year Review.

Introduction

The team started researching and collecting market information in 2016 as we wanted to gain insights into market trends which could not be found elsewhere.

Since that time, we’ve published reports on businesses listed and sold based on publicly-available information.

We search for ALL listings available online and compile the data. Although limited to publicly-available data, we rely on brokers and websites to update data when listings are sold, including the current price and deal details.

Note: Where it’s relevant, we refer to market data from additional sources like the International Business Brokers Association (IBBA). Further details and reports can be found here: IBBA Industry Research.

Page Contents


An Overview of the Numbers!

This 2020 Year In Review report focuses on businesses with $500k+ list price (or the potential to be $500k+ if they don't have a price noted). 

COVID disrupted the first half of the year. For that reason, whenever it’s relevant, we have compared the first half to the second half of 2020.

Between January 1, 2020 and December 31, 2020, we tracked 427 eCommerce businesses listed for sale. 

This consists of 121 listings carried over from previous years, plus 128 new business listings we found during the first half of the year and another 178 listed in the second half.

Here’s how the year ended.

New Listings

In 2020, there were 306 new listings (businesses listed for the first time in 2020). This included 128 in the first six months and 178 in the second six months.

Let's look at how the 306 listings breakdown based on the list price.

In 2020, there were 37 more new listings than in 2019. March, April, and June were the slowest months, probably due to the uncertainty caused by COVID-19. In July, new listings picked up again across all price points except the $1MM - $2MM range, which was slightly lower than in 2019.

Main Street (businesses in the $500K - $2MM range) represent 49% of the listings while there are 44% businesses over the $2MM+. 

The $5MM+ segment of the market keeps growing, which is a sign of times that the eCommerce business is booming. This market represented 12% of the new listings in 2018 versus 21% last year (2020), going from a mere 33 listings a few years ago to almost doubling in 2020 with 63 deals!

If we look at the listing movements by month (below) we see that the later part of the year was more active.

It also shows that the pending deals (listings that are under offer/contract but haven’t closed as yet) were significant in November and December. This may be caused by aggregators in the space scrambling to secure deals and hit targets for their backers before 2020 closed out.

There was also an interest in closing deals before the US administration change in January 2021, with uncertainty in federal tax policy changes.

Additionally, it could be said that investors became more confident in markets and the business environment overall after the election.

The IBBA reported in its Fourth Quarter Market Survey that advisors were seeing an uptick in deals at the end of 2020 and heading into 2021 because of tax concerns with the new Biden Administration. The Biden campaign proposed a significant increase to capital gains taxes, which could become effective in 2022 with budget priorities focused on offsetting pandemic government spending. This is encouraging deals to go to market and close in 2021.

Of the businesses listed for sale during 2020, over 85% were noted as earning $1 million or more in revenue (261 of 306).

Sold Listings Data

The big question on everyone’s mind for 2020 was “were businesses actually selling” despite COVID?

Of the 427 active listings during 2020, 81 were sold and 71 are pending as of December 31, 2020, which is a significant increase in absolute numbers compared to previous years.

The market is bigger but in relative terms, the percentage of sold listings is similar to previous years or slightly smaller.

86% of sales happened in the second half of the year:

  • Listings sold in 2020 H1 = 11
  • Listings sold in 2020 H2 = 70

The best months were July and December. Q4 2020 was, by far, the strongest season for sales. 48% of sales occurred between October and December.

The buyer pool expanded with a plethora of new players coming to the market in H2. The IBBA in its quarterly report found that individuals made up 75% of business buyers in 2020, with 44% of them being first-time buyers. This demonstrates an expansion of the potential buyer pool for owners looking to sell.

We also saw the time to sell drop to the lowest for the year in Q4, down to 145 days. As this is an average timeframe, this means that many deals closed much quicker than that, which is a trend we’ve noticed as well.

One of the benefits most aggregators boast about is their ability to close quickly so that sellers can realize their cash in 60 days or less.

In its quarterly report for the end of 2020, the IBBA found that advisors had expected time to close to be longer in 2020 than in prior years. Advisors thought that remote due diligence and other work-from-home issues would draw out the process, but this didn’t happen. Instead, lack of travel ended up improving the efficiency of the due diligence process, allowing deals to close as expected.

How many businesses listed in 2020 sold within the year?
58 out of 306 new listings.

There were 81 listings sold during 2020. 58 were ‘2020 new listings’ and the rest, 23, were listed in previous years.

In 2020, we tracked 81 businesses reported as sold, which equated to $465.6 million in list price value. In 2019, there were 72 sales noted with a total deal value of over $292 million, making this an increase of $173 million (or 59%) in sales for 2020. 

Looking at the sold listings by price segment we see that the $1-2 million range has the most activity. Here,26% of deals were noted as sold, although the largest businesses, those with a list price over $5MM, were very close, with 24% sold.

There is no surprise that COVID-19 impacted the market in some way in 2020. With the first half of the year extremely quiet on closed deals, it’s no wonder that the overall percentages are down year-over-year. The $500k-$1M fared the worst with only 14% of the listings being sold.

Largest Sold Listing

An $105MM eComm retailer takes the honor of being the largest business known to sell in 2020. It listed at a 4.8x annual net profit multiple, selling after 294 days (almost 10 months) on the market. It sold in November.

Days on Market

Taking a closer look at the sales by month we can see 3 things:

  1. July saw the longest days to sell at an average of 292.
  2. Sale closings peaked in Q4 with July and December being the best months. 
  3. Sales picked up from July, which indicates that the market was beginning to stabilize after the initial COVID-19 disruption of the market.

Of the deals that closed in 2020 it appears they were quickly snatched up. The average days on market were much lower for all price points, except for the $1MM - $2MM range, which remains very similar compared to 2019. There are a number of new buyers competing in the market, which is clearly a reason why deals are selling sooner.

Days to Close (From pending to sold)

The average days to close a sale in 2020, or the days that pass between the date the listing goes under offer/contract and the sold date is 99, or over 3 months. Although the term is shorter in the $500k - $1MM range (47 days) and longer for listings over $5 million (155).

Top Amazon Categories

Of the 81 sold listings in 2020, 66 listed at $1MM or above, which is where we focus our time. Below are the most sold Amazon Categories in 2020.

Sold Listings by Category


List Price Multiples (active listings)

The data suggests that those businesses that eventually sold had a slightly lower multiple than the overall average active listing. This is not uncommon and a factor we see each and every year in our annual reviews (see 2018 or 2019). Looking back to 2017, we see that multiples are slowing increasing or holding steady. 

A $5M+ deal back in 2017 was rare, which led to the multiples in that segment being higher. In comparison, now they are more common, which resulted in the median multiple slightly dropping.

The IBBA also reports that sold listings in the $5M plus range are selling at or above their asking price. The below graph shows that the $2-5M segment and the $5-50M are both achieving the highest values.

Of the sold categories mentioned above, here is how they rank in order of highest median multiple of annual net profit. A long way of saying the companies that got top dollar!
Supplements achieved the highest median multiple, with a handsome median net margin of 32%.

Also of note is that 4 of 7 categories have a 30% or higher median net margin. If you’re looking to sell your brand in 2021 know that buyers will be comparing your deal with others that meet or exceed this average margin for your niche. 

*Home & Kitchen includes a lot of sub-categories. For our data we use Amazon’s Best Sellers list to categories each listing. You can review the Amazon Best Sellers by Departments here.

Rise of the Aggregator

Aggregators looking to roll-up smaller brands into a larger business are coming out of the woodworks in every city and country, making the competition on deals plentiful. 

Marketplace Pulse reports that:
“Nearly $1 billion in fresh capital was committed in 2020 to firms looking to acquire Amazon sellers and brands (money invested is a mix of equity and debt). The market had a breakout year because of three factors: the pandemic accelerating spending on Amazon, Thrasio raising hundreds of millions of dollars, and Anker, an Amazon-native brand, going public.”

Source: Marketplace Pulse: Marketplaces Year in Review 2020

The Effect Of COVID-19 On M&A Activity

It’s helpful to look at publicly available data of general M&A activity during the year to gauge the effect on eCommerce deals heading into 2021. The first half of 2020 saw a slow down and contraction of M&A activity across the board, particularly in mega-deals. This tracks with our eCommerce data showing a more robust second half of the year. 

Several $5b+ deals were called off in industries particularly hit hard by the crisis. For example, early in the year Marathon Petroleum announced a deal to sell its Speedway brand of convenience stores to the parent company of 7-Eleven. The deal was called off in March 2020, due to the bottoming out of fuel prices. In August, the deal was back on reportedly for $21b instead of the original $22b. 

In contrast, other brands continued their deal activity depending on their industry. For example, Just Eat purchased GrubHub in an estimated $7.3b deal. FedEx also closed its acquisition of ShopRunner in December 2020. Meal delivery services thrived during the peak of the pandemic as did shipping and logistics. 

PWC reported a dearth of deals in Q2 2020 in the consumer market, with a sharp increase in both deal volume and deal value in Q3 and Q4. Within the consumer market, the retail segment experienced a marked increase, both in the Americas as well as globally. This M&A activity tracks with our eCommerce data. 

There seemed to be a mid-year turn in optimism, which accelerated in late 2020. A new administration in the US offering a message of stability and normalization coupled with the roll-out of a comprehensive vaccine strategy, supports this economic optimism.

Summary & Predictions

That’s it for this 2020 review. It was a rollercoaster ride full of ups and downs, but overall the market ended strong. Our prediction is that 2021 will be the best year yet for eCommerce business sales as the online marketplaces soar in popularity. The everyday shopper is now, more-than-ever, turning to the internet for all of their shopping needs. 

Supply and demand is in the favor of the sellers, which makes 2021 a sellers’ market, with more buyers than ever before. Buyers are getting extremely creative with their deal structures in order to compete against other bids, however they won’t always be in the sellers’ favor. 

If you’re looking to sell for the best price and at the best deal terms, reach out to us today and let’s chat about your options.

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