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APN – Takes 82% Equity Stake In brandsExclusive For Upfront Investment Of $36m: Strategy
APN pours $36 million into brandsExclusive for hefty equity stake
By Michelle Hammond
APN News & Media Limited has pledged to not “smother” online shopping club brandsExclusive with a corporate culture after splashing out $36 million for an 82% equity stake in the three-year-old start-up.
Under the terms of the transaction, APN has taken an 82% equity stake for an upfront investment of $36 million. An additional payment of up to $30 million is contingent on achieving earnings targets for 2013.
Launched in 2009 by Daniel Jarosch and Rolf Weber, brandsExclusive partners with premium brands to offer heavily discounted offers to its members. The business is on track to turn over $70 million this calendar year.
To date, more than 1.8 million members have signed up to brandsExclusive, with an additional 70,000 new members joining every month.
According to APN chief development officer Matt Crockett, brandsExclusive will continue to operate as a standalone entity.
He described brandsExclusive as APN’s first “big acquisition” in the ecommerce space.
“We were impressed with both the business and the pace at which it’s grown… It’s a fantastic addition to our portfolio and we have been working with the guys to forge a partnership.”
“Our strategy is to make sure we build these businesses by working with the entrepreneurs, and we don’t bring them in too quickly and smother them in corporate [culture].”
“APN will be closely involved but from a ‘How can we support the business to grow and use our resources to facilitate that growth?’ aspect.”
“We believe that’s what’s needed in a dynamic environment like ecommerce.”
Jarosch admits the negotiation process was a new experience for him, but believes APN has a “top management team with a great vision”, which helped put his mind at ease.
With regard to the terms of the deal, Jarosch says start-ups should “get to know the other party very well” before making any major decisions.
“In this deal, the structural alignment is much, much more important than the terms of the deal itself,” he says.
“It’s like a marriage. You can have a pre-nup but the most important thing is the core values are aligned and you’re working towards a common goal.”
When asked about the additional payment of up to $30 million, Jarosch says it’s important for both parties to “face the risks, the downsides and the upsides” together, a sentiment mirrored by Crockett.
“What we’ve got is something where we share the risk and the rewards with the entrepreneurs,” Crockett says.
Jarosch says there are a couple of things to keep in mind when negotiating a deal with a major player.
“With anything, you’ve got to keep your focus. Know exactly what your top 10 terms are… because there’ll be more than 100 avenues in the negotiation process,” he says.
“Also, when you do a deal, it’s basically like selling your own house. It’s an emotional process. It’s something we’ve built – it’s our baby. It’s important to have an advisor who can direct it forward.”
“Finally, remember that there’s always a third alternative – there’s always a solution.”
As for APN, Crockett says the company may consider making further acquisitions in the future, but is remaining fairly tight-lipped on what it is looking for.
“[brandsExclusive is] part of our long-term strategy,” he says.
“What we will be looking for is, what other acquisitions might we be able to bolt on to that core platform?”
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