Society Brands outlines M&A strategy
Society Brands, an Amazon and e-commerce aggregator, is seeking acquisitions of sellers of essential products headed into the second half of the year, says CEO Michael Sirpilla.
Why it's the BFD: The Canton, Ohio-based company is bullish on the Amazon aggregation strategy, despite recent speculation about whether dealmaking in the space is slowing or the aggregation bubble is bursting.
What they're saying: "We need to take it on a case-by-case basis," Sirpilla tells Richard. "We just need to be really prudent when we're looking at assets to acquire."
By the numbers: Society Brands aims to buy around 12 to 15 brands per year, at a clip of one to two acquisitions a month, Sirpilla says.
- Ideal targets generate annual revenue of $1 million to $20 million, with profit margins between 15% and 25%.
- Other metrics include being at least five years old, having more than 5,000 customer reviews and having a minimum 4.5-star rating.
- Valuation multiples are typically between 4x and 6x EBITDA.
State of play: Buys will be financed from the company's March $204 million capital raise, led by i80 Group.
- "It was good that we raised the capital when we did," he says, citing the company's "founder-friendly" business model as a draw for investors.
- The company has already scooped up three brands, including Damn Near Kilt 'Em, all of which are growing 40% year over year on average, Sirpilla says.
What's next: "When you’re performing an M&A strategy, capital is always on the front of mind," Sirpilla says. "And you always need to be thinking about, 'How quickly am I deploying the capital that we've already raised? Am I being a good steward?'"
- Alongside its aggressive acquisition strategy, Society Brands foresees additional fundraises, Sirpilla says, declining to elaborate on timing.
The big picture: Even though the company is focused on e-commerce in the near term, it eventually aims to pursue an omnichannel retail strategy, Sirpilla says.
- That includes taking the brands international and some brands may get their own physical stores.
- "For the right brands, brick and mortar will be the right fit," he adds.