White Paper | M&A in Online Specialty Retail
The McLean Group | Jones Day
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Mergers & Acquisitions in Online Specialty Retail
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in store as well as same day delivery are increasingly common. The movement towards omni-channel
distribution will continue in years to come.
Investor groups are seeking quality brands that are scalable. They are willing to pay attractive prices for such
brands. An effective private auction process involving multiple investor and strategic groups competing to
acquire such a company should realize a premium price for the owner(s) whether it is a full sale or
recapitalization.
Transaction Options
In working with entrepreneurs, a one-size-fits-all approach to M&A transactions doesn't work. Transactions are
as varied as the entrepreneurs who run them.
Discussions always start with an honest evaluation of where your business is today. Where would you like your
online retail business to be in 3 - 5 - 7 years? What resources and capital will you need to achieve these growth
objectives? Would a transaction help you achieve your results sooner?
The three most common transactions that we see are the following:
Online specialty retailers of scale have a wide variety of transaction options today.
Full Buyouts
Maximum liquidity to the partners
Maximum valuation for the business
Majority Recapitalization
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Sale of at least 51%or more of a company’s equity
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Operating control of the business may change depending on
deal structure
−
Usually some formof leverage (debt) is used in combination
with a majority equity investment, primarily to enhance the
equity investor’s returns
Liquidity to the partners
Rollover of equity into the new business
Partner to possibly help scale business quicker
Partner to assist in building infrastructure
Minority Recapitalization
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Sale of less than 50%of a company’s equity
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Operating control of the business is usually retained by current
management
−
Usually some formof leverage (debt) is used in combination
with a minority equity investment, primarily to enhance the
equity investor’s returns
Liquidity to the partners
Infusion of growth capital into the business
Owners retain the majority of the equity upside in the business,
“second bite of the apple”
The capital markets and future investors may be more receptive to
companies with institutional investors
M&ATransaction
Benefit
