Provided by Mergermarket
by Nidhi Madhavan in Chicago
Blue Acorn, a Charleston, South Carolina-based e-commerce development agency, is frequently approached by other players in the space looking to be acquired, CEO Kevin Eichelberger said.
“Many of my peers have been engaged in M&A conversations,” the executive said. “A lot are interested in capitalizing on what they’ve built.”
Eichelberger noted that Blue Acorn, which is majority-owned by private equity firm Beringer Capital, is not actively looking for acquisitions but did not rule out a buy if a target were to “bolster our existing capabilities.”
Beringer handles most of the initial conversations with targets, Eichelberger added, explaining that he would get involved later in the process. He declined to share whether any such talks were in progress.
Although the company is looking to diversify the suite of solutions it offers clients, Eichelberger said that making its own acquisitions is not necessarily the route he plans to take because “we’ve done well because we do one thing really well.”
Blue Acorn is instead partnering with other portfolio companies in Beringer’s “digital experience” fund, which include Brandshop, iCiDigital and HyperGiant. Eichelberger explained that these service providers each have deep vertical expertise and together function as different “knights at the roundtable.”
By providing multiple complementary solutions, it hopes to capture an untapped market of traditional consumer brands that are looking to build out their own e-commerce operations to compete with Amazon and other challenger brands, but don’t have the internal resources yet.
Beringer continues to engage in its own buy-side conversations, Eichelberger noted, although “they have a lot of pieces of the fund in place.”
Beringer acquired the majority stake in Blue Acorn in April 2017. The agency bootstrapped its growth for its first nine years of business and generated USD 12.8m in 2016 revenue, Eichelberger said.
However, he noted that in the latter halves of 2016 and 2017, the agency struggled with market dynamics and growing operating expenses, although it remained profitable.
“We passed the USD 10m mark, and at that scale we came to the realization that is was expensive to keep growing,” Eichelberger said, noting that the company needed both capital and an operational partner.
Eichelberger said that this was the impetus for bringing on Beringer. The agency has now seen record growth each month of 2017 and expects annual revenue to grow as it scales.
Competitors of Blue Acorn include Guidance, Gorilla Group and Lyons Consulting Group, which was acquired by Capgemini [EPA:CAP] last year. M&A activity in the e-commerce agency space could increase over the next year, Eichelberger added, as companies and brands look to capture “the digital piece” of their business.
Eichelberger said that agencies with USD 10m to USD 20m in revenue are typically sizable enough to attract attention from “mega-agencies” like Deloitte, Accenture [NYSE:CAN] and Sapient [NASDAQ:SAPE]. Smaller players could still attract other players, he added.
It will likely be three to four years before Beringer explores a sale of any portfolio companies in the fund, Eichelberger added. Beringer Capital did not respond to requests for comment for this report.
Grayson Thomas serves as legal counsel for Blue Acorn and Dixon Hughes Goodman is its accountant.