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Solo Brands details M&A strategy as valuations decline

Illustration of a tent made out of money.

Illustration: Allie Carl/Axios

Solo Brands seeks acquisitions of brands that have immediate synergy with its existing outdoors-loving customer base, CEO John Merris tells Axios.

Why it matters: Though publicly traded Solo Brands is opportunistic and disciplined in its approach, its optimism is in contrast with a further tightening of the credit markets due to Silicon Valley Bank's fallout and higher interest rates.

Catch up fast: The CEO of the Grapevine, Texas-based DTC platform told Axios in January at ICR's annual gathering that he thinks there will be acquisition opportunities this year and next.

  • He went on to say at the time that his company was opportunistically eyeing buys as founders seek to insulate themselves from economic challenges.

Details: The buying environment is even more favorable for the right brands now as valuation multiples decline, Merris says.

  • “Right now, we’re seeing sellers’ valuation expectations coming down from where they’ve been in the past couple of years even as low as mid-single-digit multiples of EBITDA," he says.
  • As a result, Solo Brands is actively engaged in talks with founders and CEOs of potential targets and expects to close at least one deal in the coming months, Merris says.
  • While Merris declined to comment specifically on which companies, he says they make products for helping consumers make lasting memories around a fire or food, existing categories at Solo Brands.

By the numbers: Net debt for the company is under 1.5x EBITDA, but it could be as high as (but not in excess of) between 2x and 2.5x, he says.

  • That would equate to about $130 million that can be applied toward M&A, based on SEC filings.
  • It's one of the few DTC companies that have gone public in recent years to achieve positive EBITDA.
  • As a result of its recent Q4 earnings report, its stock now trades well above $6 per share, compared to hovering around the $4 range.
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