eCommerce M&A Market Update May 2024

In its recently released May 2024 Consumer Insider, the eCommerce investment banking team at Brown Gibbons Lang & Company (BGL) recently explored the current sentiment and opportunity in the e-commerce market.

The group found several key takeaways and observations in its full report, including:

• Digital commerce continues to drive economic growth and brand value
• A committed focus to underlying business fundamentals regardless of channel strategy is the best predictor of successful investment activity
• Investor sentiment will continue to impact overall M&A activity in the Consumer sector

eCommerce as a Growth Driver in the Consumer Sector

The Consumer sector has experienced significant disruptive transformation in recent years, particularly with the advent of eCommerce and the acceleration of digital adoption throughout the pandemic. Many investments in the Consumer sector were touted as the saving grace for private and public investment as lockdowns and COVID fears brought brick and mortar business to a screeching halt. As a result, investors seeking alternatives enthusiastically deployed capital into eCommerce assets. The search for viable Consumer investments and a need to deploy capital led to a mix of extremely successful and ultimately disappointing outcomes across the public and private markets. In our view, there is a clear delineation between why some investments were winners and others were losers, the answer is the underlying business fundamentals.

The shocking events of the pandemic catalyzed consumers to turn to online purchasing as an escape. From 1999 to 2019, we can see relatively consistent growth in eCommerce sales as a percentage of total sales in the US of about 3 – 4% per quarter. However, as the pandemic took hold, from December 2019 to April 2020, eCommerce sales grew 38.7%, settling between 11% and 17% of total sales—all within one quarter.

Of companies engaging in eCommerce activity, during this spike, Consumer Products and Services vastly outpaced other industries in total amount of money raised with $7.4 billion. Information Technology is a distant second with a total of $3.4 billion. Business Products and Services, Financial Services, Healthcare and Materials and Resources round out the remaining sectors with a total of $2.4 billion, $1.5 billion, $257.4 million and $31.8 million raised ,respectively.

Notably, as the world began to re-open and normalize through 2021, we saw eCommerce activity briefly decline. But in recent months eCommerce activity has begun to climb back up to near 2020 peak levels. While we don’t encourage trying to predict the future, we think this return to growth in eCommerce sales should help dispel any doubts about eCommerce as a viable channel for businesses moving forward. Moreover, we think it indicates eCommerce will continue to be a critical growth driver moving forward.

Uptick in Deals and IPOs in the Consumer Market

The excitement that was generated by the relative outperformance of Consumer eCommerce businesses during the pandemic contributed to a dramatic increase in Consumer IPO activity. In the last 15 years, 2021, 2022, and 2023 brought in the most, second most and fourth most completed Consumer-related IPO deals. 2013 ranked third during this period with 13 completed IPOs, totaling over $7 billion dollars. Hilton Worldwide Holdings and Caesar’s Acquisition Company completed large deals of over $1 – $2 billion dollars—contributing to 2013’s outperformance. However, we can see there was quite a lull in Consumer sector IPO activity before it took off again in 2021. 2021 and 2023 brought in the most IPO activity for Consumer sectors, with 17 IPOs in 2021 and 15 in 2023. Both years saw the completion of large deals—Olaplex Holdings, a personal care company, completed a deal of over $1 billion in 2021 and Kenvue Inc., another personal care company, completed a deal of over $4 billion dollars. On average though, these years saw smaller single to double-digit deals completed. As for 2022, 11 Consumer sector IPOs were completed totaling over $150 million—again seeing smaller deals than in pre-pandemic years.

The above was just a brief excerpt from the full report. You can download the full 12-page Insider and uncover additional insights on the uncertainty surrounding the future of U.S.-China economic relations and how consumer businesses may want to adjust their future sourcing strategies as a result.

Are you looking to explore eCommerce M&A opportunities? Our eCommerce investment banking team, part of BGL’s focused Consumer Investment Banking Group, is prepared to help you develop a strategic approach. Contact John R. Tilson, or fill out our contact form below to start a conversation today.