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How acquirers evaluate brands



When acquiring a brand, there are a number of factors that buyers look for. Here are some of the most important ones:


Price range

Buyers typically look for acquisition within a specific asking price range. This is a range that makes sense relative to the buyer's current business and goals. Making sure that you match this should be part of the initial discovery process.


Product categories

Buyers are interested in acquiring brands in a variety of product categories, including Home & Kitchen, Office, Pet Care, Sports & Outdoors, Wellness & Personal Care, and Children & Education. Some categories like fashion, technology and health care require specialized knowledge that that many buyers don't have.

Years of operation

Buyers look for brands that have been operating for at least a few years. This gives them confidence that the brand has a track record of success and is not likely to fail suddenly in the near future.


SKUs

Buyers normally prefer brands with a limited number of SKUs (under 30). This makes it easier for them to manage the brand and ensure that it can grow profitably. However they can also evaluate brands with a larger number of SKUs if there is a strong core of profitable products or other exceptional reasons.


Pretax profit margin

Buyers look for brands with a margin of at least 15%. This shows that the brand is profitable and has the potential to generate strong returns on our investment.


Positioning

The brand should have easy to understand differentiation that explains why it’s working in the market. This could be a unique product, a strong brand, or a competitive price point.


Trademarks & Brand Registry

The brand should have fully registered trademarks with the USPTO and Brand Registry properly done. This protects the brand from counterfeiting and gives us the exclusive right to use the brand name.


Account Health

The brand should have no account suspensions and no serious violations to marketplace terms of service. Successful brands don’t need to bend or break the rules.


Potential for the buyer to add value

Some buyers will look for brands where they can add value in a number of ways, for instance:

  • Access to capital: this includes situations in which a brand can benefit from additional access to capital.

  • Inventory management: buyers normally have the operating capabilities to improve its inventory management to increase efficiency and ensure high selling products remain in-stock.

  • Marketing: specialized marketing expertise, for instance in developing an omni-channel model, can help a brand go well beyond its current scale.


While there is flexibility around all of these factors, it’s easier for buyers to make decisions about brands that meet most or all of these criteria.




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