DealReader - Lux Unternehmensberatung · DealReader E-Commerce Q1 2016 Inside this Issue ... the...

DealReader

E-Commerce

Q1 2016

Inside this Issue An Interview with industry expert Wolfgang Lux on Trends and Industry Consolidation in E-Commerce

Selected Transactions in E-Commerce

E-Commerce Valuation environment

Lincoln Update

Lincoln International will hold its next Consumer Conference on Thursday, 12 May, 2016 at Hotel Nikko in San Francisco

The conference will include over 40 company presentations, one-on-one breakout meetings, industry executive intro-ductions and other relevant presentations

Two highly relevant themes for consumer-oriented companies will be addressed such as (i) using digital marketing and social media to drive brand awareness and consumer engagement as well as (ii) using the direct-to-consumer channel more effectively

The conference will be an excellent opportunity to become better informed on these topics, as well as network with other like-minded companies and more than 300 professionals within the consumer industry

Global Consumer Group Q1 2016

E-Commerce DealReader | 2

An Interview with Wolfgang Lux on Trends and Industry Consolidation in E-Commerce 19.04.2016

Lincoln International: Revenues

in E-Commerce are constantly

growing, but most market partic-

ipants had to cope with signifi-

cant and partly increasing losses

as well – which brings us to the

following question: Is there a

possibility to generate long term

profits in e-commerce?

Lux: Yes, I think e-commerce will be

profitable in the long term and there

are examples from the pure-play

segment that generated profits re-

cently in the past

On the other hand, there is a problem

for those players in stationary retail-

ing that are trying to implement an

Omni channel approach. These play-

ers should not just focus on the prof-

itability of each of their sales-

channels, but need to focus on the

customer lifetime value, so, on the

whole profitability of on customers

through all of their sales-channels.

From my point of view, at the mo-

ment retailers do not really have

enough focus on this.

Lincoln International: From your

point of view, what are the win-

ning models in retailing? Is it the

pure-play e-commerce retailer or

the Omni channel retailer, or is it

the operator of an online-

marketplace, providing for the

platform without risk of own

stocks?

Lux: From my point of view all three

types of retailers or business con-

cepts have their right to exist and

stand for a certain market share.

From the point of view of the cus-

tomer, I think, that especially for

strong retail brands, such as for ex-

ample electronic retailers Media Markt

or Saturn, the customer expects and

demands a brand/market presence of

the company throughout all three

channels.

I also think that the big pure-players,

such as Amazon or Zalando - and

they proved this in the past will con-

sider opening a reasonable number of

stationary shops within the next 5-10

years. The reasoning behind this is to

bring the brand closer to the custom-

er and achieve a higher market share

through this additional sales point.

It is unlikely that they will open hun-

dreds of stores, but they might use

the same concept as for example

Apple. Apple uses flagship stores in

big cities and use them as kind of

“temples” for their customers where

they can gain a real brand experi-

ence.

But apart from this, if we look at

medium-size pure players who don’t

have the necessary resources to open

stationary shops, I also think these

retailers have their justification as

well and also do market places. The

reasoning behind this is that you

always have different customer types

that prefer a certain concept/channel

and will stick with that channel.

Customers stay hybrid in their shop-

ping behavior and thus there are

options for pure-players, stationary

retail, marketplace and any combina-

tion of those.

Lincoln International: Can you

give us an estimate for current

online ratios in consumer elec-

Wolfgang Lux

Wolfgang Lux studied Mathematics and Physics at the University of Mainz, before starting his career at IBM Germany

Leaving IBM in 1996, he joined VEBA AG and leaving after a one and a half year position there, he transferred to the Metro AG in Dusseldorf

In 1999 he was announced Managing Director of the Metro Group IT GmbH, responsible for finance, HR, corporate law, technology and international business

In 2001 he started as the

managing director of the Media-Saturn Holding GmbH in Ingolstadt, taking care of IT, logistics, organisation and technical innovation

Since then, he has been a self employed business consultant for commerce, IT, and consumer goods. Alongside this, he holds various board of director positions

From November 2013 through to March 2014 Mr Lux has held the position of Chief Financial Officer, and managing director for logistics, IT and business expansion at the “Drogerie Müller “ Group in Ulm

Wolfgang Lux is author of the book “Innovationen im Handel” which was published in 2012



tronics? It is well-known that

this segment, apart from fashion

and books, is the segment with

the highest online ratio. 2008 it

was around 9% market share,

and until 2013 it rose to around

20%

Lux: Right now the market share of

online retailing in consumer electron-

ics is around 25%, depending on the

definition and especially depending

on if you include music or not. In

fact, depending on the source there

are different outcomes. However,

from my perspective the exact ratio is

not that relevant, but it is a fact that

e-commerce is especially strong in

these segments, meaning fashion,

books and electronics. But I personal-

ly do not think, contrary to for exam-

ple Mr Samwer from Rocket, that

there will only be online-retailing in

the future. If stationary retailers are

willing to take the necessary steps,

they can be successful in the Omni

channel segment through a mix of

stationary shops and revenues gen-

erated through online retail.

One point I want to highlight is that

you cannot make a clean cut between

stationary and online retailing any-

more, in fact, this would be com-

pletely wrong in today’s age of digital

transformation. It has to be the top

priority to focus on the customer and

try to raise customer profitability. The

sales channel is still important but it

is not the single most important fac-

tor anymore and far away from being

the make or break point any more.

But I don’t think that all of today’s

retailers have completely realised this

yet.

Lincoln International: Staying

with consumer electronics, how

do the POS of the future will look

like? Will the category leaders

have to rethink their stationary

concepts?

Lux: Yes and no, we will definitely

see big flagships stores in the high

street and in the demographic areas

with a high customer frequency and

willingness to spend. These stores

will still be very attractive and very

successful in the future. But, in many

other areas, especially in combination

with the demographic change which

we can see happen at the moment in

central Europe, these stores will not

be profitable and we can already see

this happening today. It is not profit-

able in many areas to operate these

kinds of stores anymore.

This starts the discussion for alterna-

tive concepts that still offer the cus-

tomer a stationary shop and at the

same time reduce the fix costs of

operating such a shop. This concept

could be a “show-room”, which can

take many forms, for example small

areas where retailers stock only a

limited assortment of popular quick-

turnover products. There will be the

option to order online, stationary in

the store, with same day or next day

delivery and other service elements

being provided. Thus the retailer still

provides the stationary shop but at

the same time reduces its costs in

terms of rent, personnel and prod-

ucts. These kinds of ideas already

exist today and we already saw com-

panies like Media Markt and Saturn

experimenting towards that direction,

thus these concepts are not really

new.

But the main problem that existing

retailers have right now is that they

operate a very expensive, big sales

network with too much space and

costs. For them it would mean to

reduce their network step by step,

closing or significantly reducing sales

space of non-profitable stores in non-

core areas and open smaller, more

efficient stores. But, many of the big

stationary retailers are still concerned

about this step as it would mean to

shift their whole concept which bears

a certain risk that they are not willing

to take.



Lincoln International: What

tendencies or trends to you see

in terms of consolidation for e-

commerce? Will we see more

takeovers or will it be consolida-

tion by elimination because some

do not have the technological or

financial resource to survive?

Lux: You need to look at this from

different perspectives. When you look

at the big, stationary retailers, the

online sales channel has a high im-

portance for them, so they are not

willing to abandon that channel. So

the actual question is does the whole

brand survive or not. At the moment,

for the big brands in the DACH region

I do not see any risks appearing for

single players that would force them

to retreat or disappear.

If we analyze this in more detail there

is a realistic chance of merges in the

stationary business. Actually we do

have the discussion that Media-

Saturn Group is planning to acquire

British brand Dixons, which would

make sense from various points of

view. However, the intension behind

this would not be to survive or safe

themselves from disappearing, but to

achieve synergies and be more suc-

cessful in a network of non-

overlapping countries and markets.

Other mergers in the stationary busi-

ness may also be possible as we see

in France around DARTY and Con-

forama/FNAC. Reasons are tradition-

al: gaining classical market share in

domestic and foreign markets and

increase the classical buying volume

to better fight the price war on the

internet.

In the pure player segment however,

I do not really expect an M&A-wave.

Apart from few players such as Ama-

zon, Media Markt-Saturn and Otto,

most players are too small to make

acquisitions. For these companies it is

more likely that as soon as they run

out of cash without having reached

certain relevance, they will disappear

silently. Silently, because many of the

companies that you can see, for ex-

ample on price comparison sites such

as guenstiger.de or idealo.de are not

really recognized as a retailer but

rather just used because they are

cheap and have good references.

Thus, customers tend to not remem-

ber those retailers – which is a dan-

gerous positioning, because it forces

them to only compete through price.

Also buying is organized differently in

pure player markets where empha-

size is much more focused on spot-

buying compared to classical retail.

There might be a chance for pure

player to acquire foreign pure players

to enter these markets. But complexi-

ty is high and synergies are difficult

to achieve.

I do not see pure players to acquire

stationary retailers because they

don't need such a huge network. If

the go stationary, they need flagship

stores in High Street regions. Closing

all the other shops of a stationary

retailer would damage all synergies

and are no option.

Vice versa we have seen stationary

retailers acquiring pure players. Me-

dia Saturn took over Redcoon in 2011

and there are other examples. This

might still happen, but again: syner-

gies are low and the cultural differ-

ence is huge as you can see on the

storyline of Redcoon with Media Sat-

urn. Stationary retailers should care-

fully analyze the opportunities and

risks if they consider such a move.

Lincoln International: Mr. Lux,

thank you very much for sharing

your insights.



Selected Transactions in the E-Commerce Industry January 2016: Michelin acquired BookaTable, the European leader in the online restaurant reservation market with more than 15,000 establishments. The acquisition took place following a multi-year partnership between the two companies. No transaction value has been disclosed.

January 2016: Major case goods and upholstery importer and manufacturer Hooker Furniture Corporation is to become one of the top five sources for the U.S. furniture market with an agreement to purchase the business of Home Meridian International for an approx. purchase price of Euro 93 million.

February 2016: JUST EAT, the world’s leading digital marketplace for takeaway food delivery has agreed to the acquisition of four business units from Rocket Inter-net and foodpanda for an estimated sum of Euro 125 million. The businesses in-clude takeaway food businesses trading in Spain, Italy, Brazil and Mexico and the transaction is to be funded by existing cash resources.

February 2016: Souq.com, a cross be-tween Amazon and eBay and the “Amazon of the Middle East” has raised Euro 249 million in its most recent funding round. Investors include New York-based Tiger Global Management – an investor in Airbnb – as well as South Africa's Naspers, both of which were previous backers of the company.

February 2016: VDD, a French online retailer of second hand, refurbished, end of series, new and used IT equipment, ac-quires Pixmania, a French online retailer of consumer electronic goods, from Mu-tares. Pixmania entered into insolvency in October 2015.

March 2016: IAC/InterActiveCorp has divested PriceRunner to NS Intressent-er. PriceRunner is a price comparison site where consumers can compare millions of products and find the lowest prices and. The company has a presence in Sweden, Denmark, United Kingdom, Germany as well as an office in China. The transaction is valued at approx. Euro 108 million.

March 2016: Africa Internet Group, the Rocket Internet-backed company behind e-commerce site Jumia has raised more than Euro 300 million fresh funding from existing stake holder MTN, Rocket Inter-net and Goldman Sachs.

March 2016: UK-based ticket retailer Trainline acquired booking platform and mobile app developer Captain Train. The

acquisition combines two of Europe’s lead-ing digital rail ticket retailers. The acquisi-tion was valued at approx. Euro 160 mil-lion.

April 2016: Schustermann & Boren-stein, a German textile trader and exporter has acquired Swiss Online Shopping AG, a Swiss operator of online shopping club for fashion, beauty, lifestyle products and toys from Tamedia, the listed publisher of magazines and newspapers. The acquisition will enable Schustermann & Borenstein to expand its online fashion activities in Euro-pean market and will also help to enhance its market position in Switzerland.

April 2016: Vente-Privee.com has ac-quired Privalia, a Spanish online fashion retailer from a group of investors. The acquisition of Privalia is in line with Vente-Privee’s long-term strategy of strengthening its position in Europe. It will allow Privalia to accelerate its growth and expand its offerings to new sectors.

April 2016: Alibaba Group acquires the larger stake and thus the control of Laza-da, a leading e-commerce platform in Southeast Asia. The transaction consists of an investment in approx. Euro 480 mil-lion of newly issued equity capital of Laza-da and the acquisition of shares from cer-tain shareholders, totaling an investment of Euro 876 million.

April 2016: Eurazeo PME has secured a 55% stake in the secondary buyout of French bedding business MK Direct, which operates the Francoise Saget and Linvosges brands, from Alpha Private Equity. Lin-coln International has acted as the fi-nancial advisor to Eurazeo.

Recent Lincoln Transactions



European Public Comparables

Historical Valuation Multiples

Enterprise Value/Revenue

Enterprise Value/EBITDA

Median Statistics – E-Commerce Retail Europe (€ in millions)

Company

Enter-prise

Value

Quarterly Stock Perfor-

mance % of 52

Week High

EV / LTM LTM Growth LTM Margin

Revenue EBITDA Revenue EBITDA Gross EBITDA

AO World 916 6.8% 90.4% 1.4x NM 22.3% (170.9%) 17.6% (1.5%)

ASOS 3,261 (12.3%) 76.3% 2.2x 52.4x 21.4% 43.0% 50.0% 5.0%

bohoo.com 559 12.6% 99.4% 2.7x 31.8x 39.7% 40.0% 57.8% 9.3%

Cnova 915 18.7% 44.8% 0.3x NM (9.5%) (246.5%) 12.7% (2.2%)

Delticom 205 (22.9%) 62.0% 0.4x 14.6x 11.6% (0.6%) 23.6% 2.5%

Dustin 579 (9.8%) 84.0% 0.7x 14.7x 3.1% 2.5% 14.6% 4.6%

Ocado 2,327 (11.2%) 60.6% 1.7x 27.9x 22.1% 17.8% 33.9% 5.7%

YOOX Net-A-Porter 3,499 (21.9%) 73.3% 3.8x 56.0x 76.0% 21.6% 38.1% 6.7%

Zalando 6,004 (20.7%) 78.8% 2.0x 54.6x 33.6% 41.5% 45.1% 3.8%

zooplus 790 (17.3%) 80.4% 1.1x 53.9x 29.7% 53.4% 26.5% 2.0%

Median 1.5x 42.1x 22.2% 19.7% 30.2% 4.2%

Source: Capital IQ as of 31/03/2016

Median Statistics – E-Commerce Services/Platforms Europe (€ in millions)

Sector (# of companies)

Enter-prise Value

Quarterly Stock Perfor-

mance % of 52

Week High

EV / LTM LTM Growth LTM Margin

Revenue EBITDA Revenue EBITDA Gross EBITDA

Auto Trader Group 5,505 (18.2%) 85.7% 16.3x 28.8x 12.2% 12.8% 99.5% 56.6%

Cimpress 3,100 6.6% 95.9% 2.2x 16.9x 13.9% 2.5% 59.8% 13.1%

eDreams ODIGEO 598 (0.6%) 45.4% 1.3x 7.8x 1.7% 185.1% 83.4% 16.2%

JUST EAT 2,981 (28.8%) 71.9% 9.5x 41.7x 57.7% 106.0% 90.2% 23.7%

lastminute.com 65 (22.4%) 54.0% 0.3x 4.9x 69.9% 19.8% 76.4% 5.4%

Moneysupermarket.com 2,181 (19.4%) 83.2% 6.1x 16.8x 13.5% 13.2% 80.0% 36.5%

On the Beach 385 1.0% 83.7% 4.8x 21.3x 37.9% 50.3% 100.0% 22.7%

Travelport Worldwide 3,539 1.0% 79.5% 1.8x 10.3x 3.4% 2.6% 39.7% 17.7%

XING 813 (5.6%) 80.6% 6.8x 27.2x 20.9% 13.1% 62.2% 24.9%

Zoopla Property 1,439 (2.8%) 87.4% 10.6x 24.7x 34.1% 19.2% 100.0% 42.9%

Median 5.5x 19.1x 17.4% 16.2% 81.7% 23.2%

Source: Capital IQ as of 31/03/2016

1.53x

6.37x

1.64x

5.95x

1.62x

5.89x

1.52x

5.47x

0x

2x

4x

6x

8x

Retail Services / Platform

Q 1'16 Q 1'16Q 4'15 Q 4'15Q 3'15 Q 3'15Q 2'15 Q 2'15

47.3x

17.4x

48.3x

20.9x

42.9x

19.5x

42.1x

19.1x

0x

10x

20x

30x

40x

50x

60x

Retail Services / Platform

Q 1'16 Q 1'16Q 4'15 Q 4'15Q 3'15 Q 3'15Q 2'15 Q 2'15

Market Update Both retail and services /

platform companies continue to demonstrate strong sales growth with medians of 22% and 17%, respectively, outpacing the share price increases

EBITDA also increased by 20% and 16%, respectively, with positive EBITDA margins on an LTM basis

Valuations for both segments have come slightly off reflecting the

fall in share prices in line with the wider market environment

However, retail EBITDA multiples in particular remain a high level – investors are prepared to pay high prices for growth, market share and the expectation to translate these into profit margins



About Lincoln International Lincoln International specializes in merger and acquisition advisory services, debt advisory services, private capital raising and restructuring advice on mid-market transactions. Lincoln International also provides fairness opinions, valuations and pension advisory services on a wide range of transaction sizes. With sixteen offices in the Americas, Asia and Europe, Lincoln International has strong local knowledge and contacts in key global economies. The firm provides clients with senior-level attention, in-depth industry expertise and integrated resources. By being focused and independent, Lincoln International serves its clients without conflicts of interest. More information about Lincoln International can be obtained at www.lincolninternational.com.

Lincoln’s Global Consumer Group

Europe Americas

Stephan von Parpart

Managing Director (Frankfurt)

[email protected]

Dirk Langenbach

Managing Director (Frankfurt)

[email protected]

Dr. Michael Prill

Senior Advisor (Frankfurt)

[email protected]

Alka Bali

Managing Director (London)

[email protected]

Harry Kalmanowicz

Director (London)

[email protected]

Iván Marina

Managing Director (Madrid)

[email protected]

Filippo Lardera

Managing Director (Milan)

[email protected]

Dominique Lecendreux

Managing Director (Paris)

[email protected]

Francois Rispoli


[email protected]

Ludovic Rodié


[email protected]

Witold Szymanski

Managing Director (Vienna)

[email protected]

Øyvind Bjordal

Managing Director (Zurich)

[email protected]

Brad Akason

Managing Director (Chicago)

[email protected]

David Houser


[email protected]

Federico Mennella

Managing Director (New York)

[email protected]

Dominic Rispoli

Managing Director (New York)

[email protected]

Chris Stradling


[email protected]

James Sinclair

Managing Director (São Paulo)

[email protected]

Asia

Joe Chang

Managing Director (Beijing)

[email protected]

Gaurav Marathe

Managing Director (Mumbai)

[email protected]

Keiji Miyakawa

Managing Director (Tokyo)

[email protected]

Disclaimer This document contains significant assumptions and has been prepared based on publicly available information, or

additional information supplied by the owners and/or managers of the company(ies) described in this document, which

has not been independently verified. Accuracy and completeness of the information provided has been presumed and,

therefore, its content may or may not be accurate and complete. No representation or warranty, either express or

implied, is provided in relation to the accuracy, completeness or reliability of the information or statements made in this

document and Lincoln International, its affiliates, directors, officers, employees and representatives expressly disclaim

any and all liability with regards thereto. This document has been prepared for informational purposes only, is not a

research report (as such term is defined by applicable law and regulations) and is not to be relied on by any person for

any purpose. In addition, it is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell

any financial instruments or to participate in any particular trading strategy. No part of this material may be copied or

duplicated in any form, or redistributed, without the prior written consent of Lincoln International.

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