E-Commerce & Software M&A Multiple Update H1/2024

In our last multiple update for H1 2024, we showed that the severe market distortions of previous years are increasingly easing. Valuations in the e-commerce market have stabilized at a lower level. At the same time, despite ongoing macroeconomic uncertainties, the M&A volume in the sector has risen sharply, with buyers continuing to be selective and valuing sustainable profitability. In this update, we take a look at the latest multiples and the most important developments in recent months.

Amazon & D2C brand multiples

Amazon remains the dominant platform in e-commerce.

Source: Own presentation based on Gominga eServices GmbH.

For companies that mainly sell via Amazon, the multiples from H1 2024 remained largely stable at a lower level. Well-managed brands with solid margins and stable revenue trends are typically rated at a multiple of 2.0x to 3.0x EBITDA, while the entire range remains between 1.0x and 4.5x EBITDA. However, the market shows clear preferences: Growth and stable profitability are crucial, while small, less differentiated brands are increasingly struggling to find buyers. Multiples of 5.0x to 6.0x SDE (Seller Discretionary Earnings) were due to the Covid phase, aggregator hype and low interest rates and therefore can be considered abnormal and not to be expected any time soon.

Source: Sellside Partners.

Multiples for direct-to-consumer brands have also remained stable. The majority of DTC brands with attractive KPIs were again rated at 3.5x to 5.5x EBITDA in the second half of the year. Despite continued pressure from rising customer acquisition costs, it is clear that investors are still willing to pay for established brands with loyal customer bases and strong margins.

Marketplaces & SaaS multiples

Note: The following valuations are based on figures from publicly traded marketplaces and SaaS companies, which have been adjusted at a discount to make them applicable to small and mid-cap companies.

In the area of marketplaces, the valuation also remained stable compared to the first half of the year. The median value of EV/revenue multiples is currently 1.7x and thus remains well below the long-term average of 5.7x.

Source: Own presentation based on Aventis Advisors.

Even before the Covid pandemic, marketplace valuations had risen to a very high level, with a strong focus on revenue growth and profitability taking a back seat, which further drove valuations. The peaks during the pandemic are likely to be considered an exception, and investors are now focusing their attention once again on sustainable profitability. Key factors for a high valuation remain efficient use of resources, long-term customer loyalty, controlled growth and, most importantly, profitability.

After a period of hype and overvaluation between 2017 and 2019, Covid equally caused a massive increase in SaaS multiples. These skyrocketed from a small dip at the start of the pandemic to almost 10.0x . In 2021, multiples were at a high level between 8.0x and 9.0x, with peaks of over 15.0x for some companies. However, a sharp decline began in 2022, and the median fell to 3.4x by early 2023. The median EV/revenue multiple is currently at 3.3x. After the sharp slumps of recent years, SaaS valuations are now slowly recovering and returning to a more normal level like we observed in 2016.

Source: Own presentation based on Aventis Advisors.

While high growth rates remain important, there is a clear trend towards profitability: Companies that show both growth and solid EBITDA margins continue to achieve the highest valuations. The “Rule of 40” mentioned in the last blog post remains an important benchmark — companies that achieve a combination of revenue growth and profitability of over 40% remain particularly attractive to investors.

M&A volume & market development

According to a report by Capstone Partners (referring to mid to large cap deals on the US market), the M&A volume in the e-commerce sector continued to rise in the second half of 2024. The first-time increase in transactions since 2021 is particularly remarkable, after volumes had fallen steadily since then. Compared to the previous year, an increase of 41% was recorded, which signals a significant recovery after the quieter years of 2022 and 2023. Although the 2021 level has not yet been fully reached, the 2024 increase shows a clear recovery.

Source: Own presentation based on Capstone Partners.

Strategic buyers were responsible for the majority of transactions, particularly in the beauty and food sectors. At the same time, private equity buyers also remained active and focused on value-adding M&A strategies with platform investments and add-on acquisitions. One of the main drivers for transactions was consolidation at attractive multiples.

The development cannot be transferred one-to-one to the European small-cap sector, but the figures definitely show a positive trend and a recovery in the market.

Outlook for 2025

The e-commerce sector is growing steadily, and online shopping remains a key growth driver. This will also be increasingly reflected in M&A activities. For the coming year, we expect the current momentum to continue.

Profitability remains the key criterion for investors, while the market remains selective. Consolidations in the marketplace and SaaS segment are likely to continue, particularly for companies with clear competitive advantages and sustainable business models.

At the same time, technological innovations, particularly in the areas of automation and artificial intelligence, are becoming increasingly important. Companies that successfully integrate these topics will remain in demand in the M&A market in 2025.

Why Us?

To find the right buyer for your company, it is crucial to conduct a targeted analysis of the market environment and valuation multiples - regardless of whether you run an Amazon brand, a D2C brand, a marketplace, or a SaaS company.

How we support you:

Targeted buyer approach through our network

Thanks to our network of Amazon aggregators, private equity investors, and strategic buyers, we understand the purchasing criteria and interests of the relevant players. This enables us to specifically target the right interested parties and enable quick feedback and negotiations through direct contact.

Comprehensive evaluation through market analysis

We conduct a detailed analysis of the relevant valuation multiples and the market environment for your specific business model. Whether it's a D2C brand, marketplace, or SaaS company - we know what's important when it comes to valuation in your industry. With our experience in numerous transactions, we can optimally position your company and highlight its strengths, ensuring that its value and synergies are clearly visible to potential buyers.

Transparent advice without conflicts of interest

Many brokers are well connected, but often have hidden interests that can lead to a suboptimal sale price. We are on your side - with no hidden fees or quick deals at the expense of your goals. Our focus is solely on getting the best deal for you. Our goal is not only to present you with the right buyer but also to ensure a fair and market-based valuation. This way, you get the optimal price for your company and find the right partner who aligns with your strategic goals.