Most buyers (Thrasio clones) look for D2C companies with 15% – 25% EBITDA. They are usually not interested in acquiring companies with less than 10% EBITDA unless they believe growth potential is huge.
In our recent webinar on selling your D2C brand to a Thrasio clone, many founders wanted to know what's an attractive EBITDA for buyers.
Thrasio buyers, unlike venture capital investors, are particular about EBITDA. They don't invest in cash-burning startups because debt forms a large part of their capital. Thus, they have to acquire profitable businesses and grow them using both debt and equity. They need healthy EBITDA margins to service the debt.
Most buyers look for d2c companies with 15% – 25% EBITDA. They are usually not interested in acquiring companies with less than 10% EBITDA unless they believe growth potential is huge. Sometimes they acquire poorly managed businesses with strong brand loyalty because they know they can improve the EBITDA through more efficient marketing, logistics, and warehousing. But such acquisitions are exceptions rather than the rule.
Businesses with more than 25% EBITDA are hugely attractive, but in our experience as sell-side advisors to D2C brands, we have yet to see a business with more than 25% EBITDA in India. Some founders think their EBITDA is as high as 30–35%, but they are disappointed when the real EBITDA comes down in due diligence because they didn't account for some costs.
One final point on EBITDA – Buyers look at your trailing 12 months numbers. So some monthly variation in EBITDA is totally fine because they are interested in the average 12-month EBITDA. So don't stress yourself if your EBITDA decreased for a few months because you ran a promotion campaign. It doesn't matter in the larger scheme of things.