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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Brand Equity is one of the most valuable assets a company has. A brand encompasses the name,
logo, image, and perceptions that identify a product, service, or provider in the minds of
customers. How consumers perceive the company’s brand can have a huge impact on a
company’s financial performance and marketing expense. Positive brand perceptions
differentiate the product and the company from their competition.
Implementing value driver
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based metrics will likely increase the company’s ongoing sales and profitability,
while steadily building its long term value.
Preparing for a Transaction and Exit Planning
Preferably, owners should begin planning exit strategies a year or two in advance to allow ample time to grow
their companies’ investment values. In addition to identifying value drivers and developing their businesses
based on those drivers, online retailers also may undertake a number of presale initiatives that should
substantially enhance their businesses’ salability, including:
Creating tight financial controls and financial transparency - smaller online retailers may need to
hire a CFO or controller early in the process to prepare the company’s financials.
Establishing an effective management team - financial buyers are more likely to pay a premium
for a business if they are confident the acquired company’s managers will remain with the
merged company to successfully execute the post acquisition transition thereby minimizing risks
that arise from wholesale management replacement.
Committing the management team to stay with the company after the sale (to a financial buyer) -
if appropriate. A reward system to encourage management to stay should be instituted as soon as
possible.
Clarifying major contractual relationships with customers, suppliers, landlords, etc.
Registering and protecting domain registrations, trademarks, patents and copyrights. While all
online retailers should have domain registrations and trademarks in place, serious consideration
should be given to acquiring registrations and trademarks in key international markets for future
expansion.
Seeking significant favorable social media views and followers on Facebook, Pinterest, Twitter
etc. Additionally, strong PR from a variety of media along with a passionate customer base is
very important.
Reviewing and ensuring compliance with Occupational Safety and Health Administration
(OSHA) policies for distribution and corporate staff, and
Ensuring that all licenses, permits, franchise and tax registrations are in order - buyers often want
a legal opinion. Paying particular attention to state taxation issues is also important today.
