Contracts, Daily news, E-Commerce, e-commerce deals, e-commerce sales -

Global value of e-commerce deals in 2018 hits $1.1 trillion

The value of e-commerce mergers and acquisitions value grew by $20 billion over 2017’s figures, buoyed by massive transactions like Walmart’s acquisition of Indian e-retailer Flipkart ($16 billion), and Adobe’s purchase of marketing and commerce platform Marketo ($4.75 billion).

Amazon recently became only the second company to reach a market capitalisation of $1 trillion. The e-commerce giant dominates the e-commerce landscape in large swaths of the global market, but especially in its home base of the US. In the US, Amazon last year accounted for 49% of e-commerce sales, and one in 20 overall retail sales – according to Consulting. US.

Amazon’s customer service and loss-leader Prime next-day shipping puts pressure on competing retailers, while its marketplace model has spawned numerous imitators. On Best Buy’s website, for example, you can now find numerous third-party retailers in addition to products sold by Best Buy itself.

Amazon’s advertising service has become the third-largest ad seller in the US, behind Google and Facebook, holding a 4% market share and reaching $2.8 billion in revenue in Q3 2018.

“Both retailers and digital marketers are battling for consumers in an Amazon world. Amazon is both a giant competitor and a ‘frenemy’, creating opportunities for thousands of other companies to run successful e-commerce businesses by using Amazon advertising and services,” Ralph Hübner, sector principal at M&A and corporate finance advisory firm Hampleton Partners, said. E-commerce transactions by buyer type 2016 - PresentThe selection, convenience, and overall experience of online shopping – driven further by advances in smart technology like voice assistants – means e-commerce will only build up further steam. E-commerce is expected to become the largest sales channel in the world by 2021, representing close to $3 trillion in market value.

Pressured by Amazon’s penetration into e-commerce, including its more recent forays in groceries and pharmaceuticals, firms are looking to consolidate. According to recent analysis from Hampleton Partners, retailers are targeting companies that can give them an edge in logistics and resource management to improve cost efficiency.

According to the consultancy’s annual round up of e-commerce M&A, global deals increased by $20 billion, while transaction volume remained flat over the past 18 months. Deal value was buoyed by sizable transactions such as Walmart’s purchase of Flipkart. By snagging India’s premier online marketplace, Walmart hopes to generate expansive sales opportunities from India’s 300 million smartphone users.

Another major transaction was Apax Partners’ $1.85 billion buyout of New Zealand online retailer Trade Me. Apax beat out Hellman & Friedman to pick up the country’s leading online retailer.

There were 18 transactions that crack the $1 billion mark in 2018. The median disclosed transaction size for the second half of 2018, however, was a more modest $21 million.

Though strategic buyers accounted for 85% of transactions in H2 2018, private equity’s share of e-commerce deals has soared since 2016, reaching 15%.Trailing 30 Month Median EV/EBITDA

Furthermore, funding seems to be easier to achieve for established platforms, while start-ups without a bulletproof proposition are finding it tougher to access capital. “On the one hand, for established e-commerce platforms, funding value is increasing,” Hübner said. “In November, the Korean e-commerce giant Coupang raised $2 billion, followed by Indonesian leader Tokopedia’s Series G round in December, which resulted in $1.1 billion investment from Alibaba and the Vision Fund. On the other hand, it is becoming noticeably difficult for start-ups to obtain early-stage capital without guaranteeing their ability to disrupt a specific vertical through a serious data-driven platform.”

Over the past 30 months, the top acquirer was Miami-based Motorsport Network, with 17 disclosed acquisitions. The e-commerce company, which counts Autosport and Motorsport among its brands, picked up assets including online event ticketing firm SportStadion and online automotive news site Auto-live.hu.

Bite Squad, a holding company for online food delivery companies, also had 17 acquisitions in the past 30 months, inking all 17 deals on one day in October 2017. The company was itself acquired by Waitr in December 2018 for $321 million. Waitr, a US restaurant ordering app, picked up Bite Squad as part of its ambitious strategy to become the largest online food delivery service in the country.

Chinese e-commerce giant Alibaba ranked fifth, completing 10 transactions, including the acquisitions of Pakistani online retailer Daraz Group and China-based online food delivery company Ele.me.

Looking to the future, the experts at Hampleton expect growing M&A activity in the e-commerce sector to continue. “We are likely to witness more activity from strategic buyers keen to consolidate their offering and operations with next-generation technology and marketing software; and from venture and funding arms keen to capitalise on e-commerce start-ups with the potential to disrupt a unique vertical,” Hübner said.

The post Global value of e-commerce deals in 2018 hits $1.1 trillion appeared first on Payments Cards & Mobile.