Acquirers of online retailers paid a price equivalent to 15.5 times recent profits, a sharp increase from previous periods, according to a report on global ecommerce merger and acquisition activity from UK consulting firm Hampleton Partners. The total number of deals also went up.

There were more acquisitions of online retailers globally in the second half of 2018 compared with the first half, and acquirers paid a higher premium in those deals than they had in the recent past.

According to a report released today by Hampleton Partners, a consultancy that advises technology firms on fundraising and acquisitions, the number of deals involving online retailers went up 14% in the second half of 2018 to 228 compared to 200 the first half of the year.

What’s more, investors paid a higher premium for web merchants. Based on deals where the purchase price was known, Hampleton Partners estimates that investors paid 15.5 times the average of the previous 30 month’s EBITDA [earnings before interest, taxes, depreciation and amortization] for online retailers. EBITDA is a way of gauging a company’s profit from current operations. A 15.5 multiple indicates a buyer would pay $15.5 million for an online retailer that posted $1 million in EBITDA on average over the previous two and a half years.

However, the value of the second-half 2018 deals was down significantly to $3.955 billion from an unusually high $25.730 billion in the first six months of 2018. The first-half transaction volume figure was elevated due to three big deals: Walmart Inc.’s $16 billion acquisition of Indian marketplace operator Flipkart, Swiss luxury conglomerate Compagnie Financière Richemont buying online retailer Net-A-Porter for $3.3 billion, and private equity firm Silver Lake paying $3 billion to acquire U.K. online real estate Zoopla, which is similar to Zillow in the U.S.

Purchase price versus sales

The Hampleton report also noted a slight uptick to a 1.1 ratio of purchase price to trailing 30-month sales. That means a buyer on average paid $110 million for an online retailer whose annualized sales in recent years averaged $100 million. That ratio had been 1.0 for the prior three half-year periods and 0.8 in the first half of 2016.

It is becoming noticeably difficult for startups to obtain early-stage capital without guaranteeing their ability to disrupt a specific vertical.

A study by Internet Retailer in 2017 found that the median ratio of online retailer company value to annual sales was around 0.8. That study was based on acquisitions of online retailers in the Internet Retailer ranking of the Top 1000 retailers in North America by web sales. That includes many e-retailers with annual sales under $50 million, and investors typically pay a higher premium for larger companies, preferring not to have to manage several smaller companies to get a significant return on investment.

The largest deals worldwide involving online retailers in the second half of 2018, according to the Hampleton report, were:

  • Private equity firm Apax Partners paying $1.85 billion to buy TradeMe, an online marketplace operator based in New Zealand
  • Luxury online retailer Farfetch buying sneaker brand Stadium Goods for $250 million
  • Walmart Inc. paying $225 million for Cornershop, which specializes in fast delivery of orders from supermarkets, drugstores and specialty food stores in Mexico and Chile

An Internet Retailer analysis noted 21 deals in 2018 in which retailers acquired retailers. In 13 of those deals, the purchase price was disclosed or could be estimated, and those transactions totaled $25 billion. More than half of that came from the $16 billion Walmart spent last year to buy Flipkart.

The Hampleton report also noted a transformation under way in the opportunities for ecommerce companies to raise funds from investors. Some established companies attracted large sums last year, such as South Korean ecommerce marketplace operator Coupang bringing in $2 billion and a Series G round for Indonesian ecommerce player Tokopedia netting $1.1 billion.

However, raising money is getting harder for smaller companies, the report said. “It is becoming noticeably difficult for startups to obtain early-stage capital without guaranteeing their ability to disrupt a specific vertical through a serious data-driven platform,” the report said.


Some analysts have said that the difficulty online retailers and brands have in raising money is leading some of them that have not achieved profitability to sell their businesses to bigger companies. Among the deals in recent years involving North American web-only retailers are Rue La La’s acquisition of Gilt Group and Walmart buying Bare Necessities, Bonobos, ModCloth, Moosejaw Mountaineering and