With the ominous Consumer Price Index (CPI) report coming out earlier this week, there will likely be renewed fears across an already challenging dealmaking environment. But savvy investors always find pockets of opportunities in good times and bad. E-commerce being one of them. Investment bankers from Harris Williams explain.

“It’s no secret that online sales will continue to grow globally in the long-term, which will drive M&A activity in the sector for the foreseeable future as buyers look to benefit from secular trends,” Harris Williams managing director Ryan Budlong tells Mergers & Acquisitions. “Today, buyers need to be comfortable with near-term growth expectations impacted by the massive online spending increase during Covid-19, as well as the murky forecast for consumer spending amid recessionary fears. The good news for buyers is there are many high-quality e-commerce and DTC businesses that have kept scaling post Covid-19, which should continue to do so in essentially any macroeconomic environment.”

Budlong expects the outdoor and active lifestyle, pet, infant and juvenile and health and beauty sectors will be attractive because “consumers have always been willing to spend on these areas regardless of the overall macro climate.”

For example, earlier this year, A&M Capital Partners-backed Worldwise acquired Furhaven Pet Products Inc. Furhaven is an e-commerce platform for pet accessories like bedding, home and travel supplies and apparel.

Many middle-market companies are still early in their transition to digital capabilities so there’s no doubt e-commerce deals will grow as a result. 

“Buyers are now determining what sustainable growth looks like in a post-pandemic environment,” adds Harris Williams managing director Will Bain. “We’ll have more concrete answers in the near term, which will likely spur more M&A activity.”

– Demitri Diakantonis