The retail industry was already facing challenges before the pandemic turned the world upside down and accelerated inevitable changes for the retail industry– especially for bricks and mortar businesses. It, therefore, doesn’t come as a surprise that ASOS only purchased the Topshop brand and Boohoo plc only bought the Debenhams brand. In both acquisitions, the real estate was not part of the deal and consequently the employees at those locations were left behind.
It has become evident that what matters in this market is brand. And brands are no longer dependent on having a central location with a high footfall to become known and popular. Websites have replaced bricks and mortar stores and customer reviews have replaced footfall. Centralized warehouses can easily cater for multiple brands, storing their merchandise until it is sold. Amazon recently struck a deal with the City of London to turn 39 of its car parking spaces into “last minute logistics hubs”.
As many businesses have learnt during the pandemic, if people can do their job from anywhere, anyone can do their job. And they can do it flexibly and cheaply. There is, therefore, no need to set up an expensive payroll account and pension scheme, individuals can be contracted flexibly in jurisdictions where neither of those requirements are mandatory. No real estate overhead and flexible employment options make such businesses attractive acquisition targets.
This is clearly reflected in the recent work MBM’s M&A practice has done, a lot of which has been for aggregators of e-commerce businesses or founders of e-commerce businesses cashing in. MBM is well-versed with the speed-driven challenges of traditional M&A, which for decades has been based on the process for acquiring businesses with premises, employees, pension schemes, assets and liabilities. A pragmatic, fast and commercial approach has allowed us to assist our clients scale in these old-fashioned legal environments.
How does one buy an e-commerce business at lightning speed? Conveniently, the current market and the businesses that are in high demand have already set the stage for speedy acquisitions. Rife competition means due diligence needs to be fast. Luckily, buyers don’t need to inspect vast premises and have environmental experts dig holes in polluted grounds or check the walls for asbestos. Likewise, virtual assistants who are paid by the hour, located in a foreign jurisdiction and not entitled to a pension scheme don’t need a lot of notice or consultation. And, as the e-commerce industry has only grown exponentially in the last decade, many e-commerce businesses have not been around long enough to build up a credit history required to obtain a loan from a bank or get muddled in extensive tax issues.
We are not saying the process is challenge-free but we like a challenge
If you are acquiring e-commerce businesses or are a founder looking to sell your e-commerce business and need a fast-paced legal team on your side, please reach out. We can help you cross the finish line with ease.