On the face of it, there’s never been a better opportunity for buyers of multichannel merchants. The blood’s in the water.
While this past summer’s multiples have held steady for most marketers with sales of less than $75 million, the multiples have come down for the best-run companies, according to Stuart Rose, managing director of Wellesley, Mass.-based investment banking firm Tully & Holland. The fact that multiples have shrunk to eight times earnings, down from 10 times earnings, only bolsters the case for buyers. But the sharks aren’t biting — at least not yet.
As with the real estate market, prices for dream houses — or dream marketers throwing off plenty of cash flow, in this case — have come down considerably. But who can afford them? While that oceanfront home will cost you far less this year than last year, you’ll have difficulty qualifying for that mortgage. The same principle holds true in the current merger and acquisition climate, as the financing markets have evaporated fast. Only the most well-capitalized are getting the financing to do deals.
Limited M&A Excitement
Don’t get me wrong. Some deals are getting done, but they’re hardly exciting.
Virginia Beach, Va.-based personalized gifts cata-loger Lillian Vernon, operating in bankruptcy, was sold to Current USA, a subsidiary of Taylor Corp., on April 3 for $15.8 million. Quick question: How many do-overs can Lillian Vernon get and still be relevant? This could be its last chance. Lillian’s customers might not see its financial difficulties, but its creditors certainly do. Current may have great relations with its payors, but creditors have long memories. Then again, so does Lillian herself, and she can’t be terribly happy with what’s become of her once thriving start-up.
Perpetual loser RedEnvelope, also operating in Chapter 11, was sold to Provide Commerce, which agreed to acquire the troubled marketer’s assets on May 27. Yawn. Put it this way: Remember in “The Godfather, Part II” when Michael Corleone described adversary Hyman Roth as, “dying of the same heart attack for 20 years?” That rings true here. Haven’t we heard RedEnvelope’s tale of woe before?