Selling Your FBA Business? Here’s What You Need to Know About Amazon Aggregators

If you are considering selling your Amazon business, understanding how Amazon aggregators operate is essential. By knowing what they’re looking for and how to engage with them effectively, you’ll have a significantly better chance of accomplishing your exit goals, regardless of whom you choose to sell to.

In this article, we discuss:

• How the Amazon aggregator business model works
• The benefits of working with Amazon aggregators
• What Amazon aggregators are looking for
• What sellers should do when dealing with Amazon aggregators

“In short, an Amazon aggregator firm is a business that focuses its operations on purchasing Amazon businesses. They do so with the intention of growing the business over time in order to increase revenue or sell it for a higher price.”

What Is an Amazon Aggregator?

As the Amazon platform and ecommerce business ecosystem have matured over time, so too has the marketplace for Amazon businesses. The rise of Amazon aggregators over the last several years is one of the most important aspects of this change. So, what is an Amazon aggregator?

Amazon aggregator firms

In short, an Amazon aggregator firm is a business that focuses its operations on purchasing Amazon FBA businesses. They do so with the intention of growing the Amazon FBA brand over time in order to increase revenue or sell it for a higher price.

Amazon aggregators buy, grow, and sell FBA brands for a living. They are often well-funded organizations that employ a team of highly experienced Amazon experts. These professionals cover all aspects of Amazon business operations. Their deep capital stock and skilled talent pool allow them to grow businesses more quickly and effectively than many entrepreneurs can do on their own.

Aggregator firms have been around for decades. During the 1980s, these firms went on a buying spree, scooping up traditional retail commerce stores around the country. As the Amazon marketplace has expanded and developed in the last decade, Amazon aggregation has emerged.

Over the last several years, Amazon aggregators such as Society Brands have been aggressively buying up Amazon brands. Once purchased, they roll them into their growing portfolios. As this movement has gained momentum, it has reshaped the marketplace for buying and selling Amazon businesses.

As an Amazon business owner, you will likely encounter an Amazon aggregator when you go to sell your business. You may even receive an unsolicited offer from one before you are working toward an exit.

“Their deep pockets and skilled talent pool allow them to grow businesses more quickly and effectively than many entrepreneurs can do on their own.”

Efficiencies of scale

When aggregator firms are buying a business, they focus their attention on companies that have room for future growth. Because of their size and capital stock, aggregators are able to take advantage of efficiencies of scale when buying, growing, and selling FBA brands.

As an FBA seller, you are likely responsible for your product sourcing, packaging design, supply chain management, marketing, and more. Amazon aggregators, on the other hand, have dedicated teams of ecommerce experts focused on handling each aspect of the business.

In other words, aggregator firms can be likened to highly calculated Amazon business factories. They provide a greater level of consistency and professionalism to the entire operation from buying to selling. For many, this approach can bring benefits as well as drawbacks if you decide to sell to an aggregator.

Benefits of Working with Amazon Aggregators

Selling an Amazon business can be a sensitive endeavor. With so much on the line and so many details to attend to, there is ample opportunity for the process to become derailed at some point along the way.

While there are certainly drawbacks of selling your business to an aggregator firm, an organization that brings a high level of professionalism to the process can also provide some benefits, including:

• Fast closing times
• A focused process
• Reduced broker fees
• Cash offers
• A commitment to closing

Fast closing times

When selling your Amazon brand, the closing process can be a nerve-wracking experience. Many deals fall through during closing. As such, having a shorter closing period can help to alleviate worry and make the selling process a less stressful endeavor.

Compared to other buyers, Amazon aggregators are known to have shorter closing times. Of course, individual situations may vary, but this is true as a general rule. Oftentimes, aggregator firms are comfortable with a closing period of 30 days or less.

Focused process

As mentioned before, the top Amazon aggregators take a highly focused and professional approach to their work. As the seller, you can expect aggregator firms and their representatives to know what they are looking for in a potential business. They will thoroughly examine your financial statements and other documentation to carefully verify all of your information.

Aggregators use this information to make data-driven purchasing decisions. Individual buyers may sometimes be impulsive or make emotionally driven decisions. Aggregators, on the other hand, will cut through the noise with their analysis and approach the process in a rational and informed manner.

Selling your hard-earned business can be emotional enough as it is. Working with a partner who brings to the table a focused and calculated approach can help to tamp down the emotional tenor of the entire process.

“Oftentimes, aggregator firms are comfortable with a closing period of 30 days or less.”

Reduced broker fees

Oftentimes, aggregator firms will approach Amazon sellers with an offer, even if the business is not even currently on the market. When doing so, they will position themselves as a one-stop shop for selling your brand. One of the main benefits they often highlight is that by working with them, you can save money when it comes to broker fees.

On the surface, this may appear like a major benefit to working with Amazon brand aggregators. Depending on the deal offered, it may be worth it. After all, who likes to pay fees if they don’t have to?

As we will explore later, however, saving yourself on broker fees often does not lead to the best outcomes for you as the seller. What may seem like a short-term gain can actually lose you money and cause headaches when all is said and done. There are many benefits to working with an experienced Advisor when selling your business. This can be especially true if you are dealing with an aggregator firm.

Often make cash offers

There are many ways to finance the purchase of a business. As with many types of large transactions, receiving a cash offer as the seller is often favorable to other forms of financing.

Due to the fact that aggregator firms are often well-funded enterprises, they are more likely to make a cash offer, at least in part, for your business. We will explore the preferred deal structure of aggregators in more depth below.

“By being open, honest, and up front with the buyer, you can work to overcome any unforeseen challenges together and arrive at satisfactory deal terms.”

Committed to closing

Even with a motivated buyer and seller who are both operating with good intentions, there are many different things that can come up during the sales process that can derail the deal. Unexpected supply chain problems, copyright infringement issues, or inventory challenges are just a few examples.

When these issues arise, it is understandable for the buyer to smell trouble and get cold feet, pulling out of the deal in order to look for a different business to buy that doesn’t come with unexpected headaches.

In general, however, aggregators are more committed to closing the deal than many other potential buyers. When issues arise, they will take the same data-driven approach to understand the new challenge and find workable solutions. While this may entail some renegotiation, it doesn’t necessarily mean the deal will fall apart.

As the seller, this helps bring a measure of security to the process. You know you are working with a partner who is serious about buying your business. By being open, honest, and up front with the buyer, you can work to overcome any unforeseen challenges together and arrive at satisfactory deal terms.

What Amazon Aggregators Are Looking For

We know Amazon aggregators bring their expertise and resources together in a highly focused approach to purchasing and running Amazon businesses. But what exactly are aggregators looking for when they evaluate a potential acquisition?

The exact features of a potential purchase vary depending on the particular needs of their portfolio. For example, some aggregators may be looking for a smaller, private-label third-party seller, and some may be looking for firms with higher annual revenue. In addition, some may be looking for specific product categories. There are several common things, however, that most aggregators pay attention to when looking for prospects.

ROI potential

As FBA acquirers, aggregators aim to purchase existing businesses, grow them rapidly, and resell them for a profit. As such, aggregators are looking at new business acquisitions as an investment opportunity.

When looking at a business to purchase, aggregators will look to see the ROI potential of that business. What is the purchase price? How much can they expect it to grow under their ownership? How much do they think they will be able to sell it for, and in how long?

Of course, in order to maximize their ROI, it makes sense for an Amazon FBA aggregator to purchase a new business for as little as possible. At times, they will take advantage of a gap in knowledge and lack of competition to purchase businesses at below market value.

Knowledge gap

For those selling a business for the first time, or even those who have some experience, the process can be overwhelming. It is an environment where knowledge is power. Knowing the ins and outs of the acquisition process can dramatically transform the final sales price and deal terms you are able to achieve.

On the other hand, coming into the situation with a lack of knowledge can lead to a subpar outcome for you. Of course, aggregators approach the process with a very high degree of knowledge and expertise. They know what to look for, how much a particular business is worth to them, how much they are willing to pay, which questions to ask, and how to negotiate.

Often they will use this gap in knowledge to drive down the sale price and get a good deal. While it could be considered opportunistic by some, they are simply working to maximize their eventual ROI.

The best way to defend against this is to close the knowledge gap by working with a qualified Advisor. In addition to providing you with helpful tips for selling your business to an Amazon FBA aggregator, they will guide you through the entire process step by step, allowing you to negotiate from a more equal footing.

“Knowing the ins and outs of the sales process can dramatically transform the final sales price and deal terms you are able to achieve.”

Deal structure

Of course, the exact deal structure you wind up with will depend on your agreement with the buyer. Deal terms may vary widely depending on what both you and the aggregator are seeking.

However, aggregators will often seek a deal structure where 80 percent of the agreed-upon price is paid up front at the time of sale. The remaining 20 percent is paid over the following 1-2 years. This 20 percent payment is often contingent on certain performance criteria being met.

This has several implications. First of all, it ties your eventual payout to the performance of the company after you sell it. In this situation, many sellers may want to stay involved with running the business in order to ensure it continues to perform well. If this arrangement is to your liking, this option can actually yield a higher final sale amount. This is because the value of the remaining 20 percent can increase as the company continues to grow.

However, other sellers may prefer a clean break and want to sell the business outright. This way they completely remove themself from the ownership and operation of the business. In addition, some owners may need all of the cash up front in order to fund other investments or purchases.

Of course, the 80/20 deal structure does entail some risk for the seller. If the agreed-upon performance criteria are not met, the remaining payout may be in jeopardy.

These are all terms and conditions you will need to negotiate with any interested buyers. By knowing how to deal with Amazon aggregators, you can work to create more favorable deal terms for yourself.

“Aggregators will often seek a deal structure where 80 percent of the agreed-upon price is paid up front at the time of sale. The remaining 20 percent is paid over the following 1-2 years.”

What Sellers Should Do When Dealing with Amazon Aggregators

In general, when preparing to sell your business to an Amazon aggregator, you should approach the situation in a similar fashion to how you would deal with any interested buyer.

Given the structure and tactics of many Amazon aggregators, however, it is important to highlight several steps to take when selling your business to Amazon aggregators. These include:

• Creating competition
• Receiving an unbiased business valuation
• Closing the knowledge gap
• Negotiating more favorable terms

Create competition

When selling a business, competition is your friend. However, aggregators will often approach Amazon sellers with a singular offer, even if the business isn’t on the market. They will do this in order to be the only apparent option for the seller to consider. In this environment, they can successfully negotiate a lower sale price and better deal terms than they otherwise would be able to in a competitive bidding environment.

As an Amazon seller, then, it is important for you to create a competitive environment in which to sell your business. Solicit alternative bids from multiple interested parties. Do your homework and take your time. The first offer that comes in, while exciting, may not be your best route to take.

Regardless of whether you have a small business or a bigger company, an experienced business Advisor can help you access a larger pool of potential buyers than you would on your own by leveraging their networks and connections. In addition, business listing sites can also serve to attract interested parties.

“When selling a business, competition is your friend.”

Receive an unbiased business valuation

It is also important to receive an unbiased and accurate valuation for your Amazon FBA business. While an aggregator may try to counsel you on this matter, it is wise to get an independent valuation to avoid conflict-of-interest issues.

This is another area where your business Advisor can help. They will work with you to ensure that you have an accurate understanding of just how much your company is worth. Armed with that knowledge, you will be better prepared to evaluate incoming offers. This will allow you to negotiate a price that accurately reflects your company’s value.

Close the knowledge gap

Negotiations are more balanced when both parties have similar levels of knowledge and expertise. As we’ve seen, aggregator firms bring a wealth of knowledge to the transaction process. In order to level the playing field and negotiate from a strong position, it is important to close the knowledge gap with the aggregator firm.

For most entrepreneurs, having an experienced Advisor on their side serves to ensure that both parties are negotiating fairly and in good faith. Your Advisor will know how to spot a lowball offer, how to approach negotiations, and what to discuss in order to win better deal terms and a higher price.

Negotiate more favorable terms

Aggregator firms are often looking for a quick deal at a low price. They will present themselves as a convenient, one-stop shop for selling your business. If expediency and convenience interest you, this may serve your purpose.

But it is important to know you have the ability to negotiate with the aggregator in order to win a higher price or better payment terms, or both. Again, by doing your research, closing the knowledge gap, and working with an experienced Advisor, you will likely find it worth your time and energy to negotiate for your own interests.