HMT Director Ricky Lane recently hosted a live webinar on value drivers within the e-commerce fulfilment sector and how recent events have impacted this space over the past 12 months.  Ricky was joined by four expert panellists from within the sector during the session:

  • Nick Wells – CEO at leading delivery management company Whistl whom HMT have advised on numerous transactions;
  • James Hyde – Co-Founder and CEO at e-commerce fulfilment provider James & James who took on private equity investment from LDC in 2020;
  • Alex Snodgrass – Investor at BGF, who recently invested in global fulfilment specialists, Fulfilment Crowd; and
  • Pascal Wittet – Investment Partner at private equity house Ethos Partners who are invested in a number of companies who use outsourced fulfilment (Pet Mate / Motocaddy) and are actively seeking to invest in the sector.

Ricky and the Panelists explored four main topics during the webinar, looking at the macro-economic impact of both COVID and Brexit on the sector, the use of technology and M&A value drivers, as well as welcoming questions from the guests.

Below are the main takeaways from the session.

How the e-commerce fulfilment sector has been impacted by recent events

The impact of Covid-19

  • Accelerated five years of e-commerce demand growth in 12 months
  • This increased demand will stick post pandemic due to the structural trends towards outsourcing and growth in SME retailers
  • The high street will become a place to go as a day out and many will continue to make the final purchasing decision online

The impact of Brexit

  • Tightening of the labour market in the eCommerce supply chain due to EU nationals leaving the UK prior to Brexit
  • Issues around tariffs / levies / charges and the time it’s taking to get stock across border is making a lot of retailers look for a solution where they can fulfil directly from the EU
  • The solution is being provided via strategic relationships with existing continental operators or by setting up greenfield investment in new sites

The M&A market in the e-commerce fulfilment sector

Technology driven

  • Not important in itself but important as an enabler to delivering an efficient and cost-effective service
  • For institutional investors, the value in the technology is its ability to allow a company to scale quickly without undue reliance on people or capital expenditure
  • In the medium term, physical technology within the fulfilment centre is likely to remain limited to the automation of basic tasks to reduce headcount rather than deep robotics and AI

M&A Market

  • Trade acquisitions being driven by the ability to buy in unique capabilities and to add scale to drive efficiencies
  • Institutional investors believe there is still a significant amount of growth to come in the sector and therefore remain committed to investment
  • Multiples are being driven by the target’s ability to use technology to scale, whether their proprietary technology will provide a competitive edge, the vertical that it serves, and the capital-intensive nature of the operation (capex light models attracting a higher valuation)
  • Understanding the EBITDA position and demonstrating that the acquirer isn’t buying off the back of a COVID-bump is going to be key for the next 12 months

If you would like to receive a link to a recording of the full webinar session or if you are considering entering an acquisition, disposal or fundraising process please contact Ricky Lane at rlane@hmtllp.com.