Unybrands has raised $25 million and so far acquired two companies that sell on Amazon marketplaces and their own websites. The founders have roots in Europe and will aim to buy companies focused on health and sustainability and grow them by bringing European brands to the U.S. and vice versa.

New companies keep emerging that raise funds to buy small brands selling successfully on Amazon’s marketplaces, with the aim of growing those businesses by providing them with capital and expertise in marketing, technology and product sourcing.

Among the latest to debut is unybrands, whose management team includes executives with experience at investment banks like Barclays and Goldman Sachs, tech companies like WeWork and Airbnb, and online retailers Amazon.com Inc. and Zulily, the children’s apparel e-retailer that is owned by Qurate Retail Group.

Amazon is No. 1 in the 2020 Digital Commerce 360 Top 1000 and Qurate is No. 9.

Some of the early funds are beginning to show some success, so investors are throwing more money at them.
Thomas Smale, CEO
FE International

The company has raised $25 million and acquired two brands so far, says co-founder and CEO Ulrich Kratz.

Unybrands will be competing with dozens of other companies that have raised cash specifically to buy smaller brands that have carved out a niche on marketplaces run by Amazon.com Inc. and other companies.

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In 2020, the funds dedicated to buying ecommerce companies increased dramatically to $5.8 billion from $1.3 billion, according to FE International, which advises business owners on mergers and acquisitions. And FE says acquisitions of companies selling on Amazon accounted for a majority of ecommerce deals last year, up from less than a quarter in 2018.

With third-party sellers accounting for 60% of Amazon’s sales, there are plenty of successful Amazon brands for investors to buy, says Thomas Smale, CEO of FE International. “Plus some of the early funds are beginning to show some success, so investors are throwing more money at them,” he says.

There are now at least 51 companies focused on buying Amazon brands, according to U.K. business broker Hahnbeck. Thirteen of those companies have publicly disclosed their funding, and they have collectively raised over $2.6 billion in capital. 

Leading the way is U.S.-based Thrasio, which has $1.6 billion at its disposal from venture capital it has raised and bank lines of credit. Thrasio has acquired nearly 100 brands and is closing two to three deals a week, the company says.

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Focused on the consumer who values health and sustainability

While unybrands is just getting started, Kratz says there are a few things that set it apart from competitors. One is that it targets a certain kind of consumer—one interested in health and sustainability—and will focus on finding products geared to such shoppers in just eight product categories, divided into two groups.

One group is consumables—personal care, pet supplies, household products and supplements—and the second encompasses durable items in such areas as juvenile and baby, sports and fitness, garden and outdoor, and lifestyle/home.

Ulrich Kratz, co-founder and CEO, unybrands

Ulrich Kratz, co-founder and CEO, unybrands

“By focusing on only eight categories, we can work our supply chain more effectively,” Kratz says. “We don’t have to go out each time to learn a new vertical. The category focus is a key.”

Another key is that unybrands will be able to work both sides of the Atlantic Ocean. Its three co-founders are all natives of Germany with experience working in the United Kingdom. Kratz will be based in Miami—being on the East Coast will minimize the time difference with Europe, he says—and the firm will also have offices in Europe. The company currently has 15 employees.

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unybrands pursues a trans-Atlantic strategy

One of unybrands’ strategies will be to take successful U.S. brands and bring them to Europe, and European brands to the U.S. That geographic expansion is often beyond the capability of small companies, Kratz says.

There are tax and regulatory obstacles to entering new markets, Kratz says, but those are relatively easy to overcome. “What’s hard is to get the culture and the regional preferences right,” he says. “That’s where our team will excel because we’re coming from a cross-Atlantic background.”

Kratz says one of the brands unybrands has acquired makes children’s products and the other makes water-filtration devices. He declined to name them. Both companies sell via their own websites as well as on Amazon. Kratz says unybrands will seek to expand sales of its brands to marketplaces beyond Amazon, such as Walmart.com, as well as through its own ecommerce sites. Walmart Inc. is No. 3 in the 2020 Digital Commerce 360 Top 1000.

 Other Amazon brand buy-up firms expand

Meanwhile, unybrands’ competitors continue to raise funds and grow. Recent developments include:

  • Branded Group announced that it has raised over $150 million and acquired companies with over $100 million in annual sales. Founders include veterans of Lazada Group, the operator of online marketplaces in Southeast Asia that is No. 11 in the Digital Commerce 360 Top 100 Online Marketplaces, which ranks online retail marketplaces by the value of merchandise sold, and of Softbank, the Japanese investment firm that has invested in Alibaba Group, the Chinese marketplace giant that owns a majority stake in Lazada.
  • Elevate Brands disclosed it has raised $55 million to acquire Amazon brands. The company has offices in New York and Austin, Texas. “We acquired our first business in December of 2019 and several more during 2020,” a spokeswoman says. “We anticipate we will have in excess of 35 brands by year-end.”
  • Israel-based Technology Commerce Management announced it has raised $28 million and will use its artificial intelligence technology to identify acquisition targets among retailers selling on Amazon, eBay and their own websites.
  • Thrasio announced it had raised another $750 million, bringing its total funding to $1.6 billion, making it the leader in publicly disclosed capital raised among buyers of Amazon businesses. The company says it has acquired 95 companies and is closing two to three deals each week.

More demand leads to higher valuations of Amazon brands

These companies are often referred to as buyers of FBA businesses, as many of the Amazon brands they have acquired use Fulfillment by Amazon, relying on Amazon to store their merchandise and fulfill their orders. Many of these buyers are primarily interested in expanding sales of the products the Amazon brands have developed, not in running fulfillment networks, and so prefer businesses that haven’t invested in warehouses.

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Thomas Smale, CEO, FE International

Thomas Smale, CEO, FE International

The steady flow of capital into these aggregator firms has raised the value of Amazon brands seeking to sell their businesses, says Smale of FE International. He estimates the value of these companies on average has increased 18-19% in the past year and that profitable brands are attracting six to eight bidders.

Many factors go into determining how much an FBA brand is worth, Smale says. He says buyers typically are looking for brands that are growing, profitable and doing something unique that would be difficult for others to copy.

Buyers generally are offering three to five times what Smale describes as “seller discretionary earnings”—company profits plus the income the owner is taking out of the business. In other words, if the owner is paying himself an annual salary of $1 million and the business is making $1 million in profit on top of that, its total “seller discretionary earnings” would be $2 million.

The selling price of a company with $2 million in earnings, thus, would be typically between $6 million and $10 million.

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Interest is especially high in brands that have achieved some scale, particularly those generating revenue of more than $10 million a year, Smale says. “Once a business gets to that $10 million level,” he says, “the multiple starts to increase.”

 

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