Amazon FBAs – hot targets?!

Berlin Brands Group, Thrasio, SellerX, Branded, Heroes, Razor Group, Heyday, Perch.... These companies have raised over USD 1.5 billion in capital through funding rounds and debt financing to invest in eCommerce companies in recent months. Especially in the wake of the COVID-19 pandemic, this market has become even more interesting for investors than it already was. But what makes up the business models of the target companies and what legal particularities have to be taken into account in transactions?


April 2021

Berlin Brands Group announces USD 240 million debt financing with participation of Deutsche Bank, Commerzbank and UniCredit Group.
Thrasio closes USD 100 million Series C financing round

March 2021:  

Berlin-based SellerX raises EUR 26 million after already raising USD 118 million in Novembe 2020

February 2021:

Branded receives USD 150 million funding and acquires 20 best-selling brands
Unybrands receives USD 25 million seed investment

January 2021:

Thrasio announces debt financing of USD 500 million

November 2020:     

Heroes receives USD 65 million seed funding (founders around ex-EQT venture manager Riccardo Bruni)
Razor Group announces EUR 25 million funding round
Heydey raises USD 175 million in Series A round.

October 2020:

Perch raises USD 123.5 million in third financing round

This overview from the last six months represents only a sample of the current development of companies specialising in acquiring Amazon Sellers and Amazon FBA Sellers in particular. Thrasio has even broken the US record for the fastest conversion into a so-called unicorn (company with a valuation of over one billion US dollars) with its own growth since the start in 2018.

The investors' business model

Due to the accelerated digitalisation of retail, the importance of virtual sales platforms continues to grow. COVID-19 acts as an additional catalyst here. The aforementioned investors are taking advantage of this development. They specifically look for retailers on Amazon (especially in the area of "Fulfillment by Amazon", or FBA for short) with high-turnover products, which are bought up and integrated into a group of companies with other brands. In this way, highly profitable and possibly specialised companies are to be created with Amazon as their Europe-wide sales channel.

Transaktionsprofil und Besonderheiten

At first glance, Amazon FBA sellers seem predestined for investors to achieve rapid growth with a large number of transactions in a short time: The business processes are recurring and mostly simply structured. This allows for a quick understanding and analysis of the business models and a speedy examination of the financial, legal and tax circumstances in the context of due diligence. At the same time, there are no significant peculiarities in the structuring of the (primarily) share deals, so that the parties have access to proven schemes and patterns.

In fact, however, the transactions do have a number of special features and the devil - as is so often the case - is in the detail. This starts with the determination of the purchase price in the term sheet and the purchase agreement. For example, the purchase price is often derived from the net sales minus the variable costs, but without precisely recording the variable costs. The determination and valuation of inventories is also relevant to the purchase price; in particular, possible discounts for so-called "stock bums" play an important role. Here, a valuation method must be determined as early as possible. In due diligence, the confidentiality of relationships with suppliers plays an important role for the sellers, so that their identity is often not to be disclosed until late in the process. This can greatly complicate due diligence, but it must definitely be taken into account in the valuation and audit structure. In addition, the sale processes and purchase price regulations are strongly characterised by earn-out provisions, which often make up a significant part of the purchase price to be achieved. The necessary implementation of the economic results in legally (often years later) precisely measurable, manageable and enforceable regulations not only requires a relatively large amount of time (measured against the process), but also a clear understanding of the respective business model, market and its volatility. Finally, the overall dependency on Amazon and the valuation on the platform must be appropriately reflected in the contractual documentation, which is impossible without knowledge of the relevant mechanisms and dependencies. All of this requires economic and legal advisors with an eye for the essentials and the right instinct for the relevant problem points.


The market is - still - huge. On the one hand, there is a larger number of investors who each have considerable financial resources and are aiming for a very large volume of transactions (up to 100 transactions each in the next two to three years). On the other hand, it is assumed that several thousand Amazon FBA sellers are active across the various product categories in Germany alone and are at the top of the investors' list. Added to this is a comparable number of online shop operators whose products are also sold on Amazon and are additionally eligible for acquisition by these investors. The supposedly simple business model may tempt one to overlook the existing actual and legal peculiarities of the FBA business. We have already had intensive experience in some sales and purchase processes with specialised investors. We know how dormant potentials can be raised and how mistakes can be avoided in the legal drafting of contracts.

Michael Ströbel, LL.M. (University of Auckland)

Michael Ströbel, LL.M. (University of Auckland)
+49 711 9338 19158