Amazon.com to acquire AbeBooks

[...] expansion into the “book aficionado” market. Terms of the deal were not disclosed but TechVibes has some interesting analysis on the possible range of the transaction: If you look at comparable online e-commerce businesses [...]

Congrats to everyone involved. This will help put BC on the map again.

Great news! Congrats to all!

You must have clout as all of the news agencies are quoting your sales estimate as an official range.

Here are some problems wih your guess however.

Amazon didn't disclose the price or terms of the deal which means that by Nasdaq rules it must be a non-material transaction.

The $190M gross merchandise volume is that amount of merchandise that Abe booksellers sell. If Abe receives an average of 7% of sales (small guys pay 13.5% but larger ones get deals) and 13,500 booksellers paying an average of $300 a year in monthly fees (same logic) then that makes the total revenue in the $12M to $20M range (depending on how they account for the revenue on the indirect sales)

The company probably pays 2% or so of sales in credit card fees and employs 100 or so staff so they probably earn a few million a year max.

My guess would that the deal was probably in the $40M to $60M range then depending on how much of a premium Amazon wanted to pay for the strategic value of the deal. Revenue multiples of 3x-4x were common last year but they have come down.

I am not saying that this was a bad deal or that congrats are not in order to Burda. Burda and the rest of the sharholders I am sure did very well and it was probably a very good time to sell given the state of the US economy.

I was only challenging the estimate of the purchase prcie.

Great news and a reminder to all that we have great talent in BC and across Canada. Congrats to everyone involved.

@Who knew - I've been following AbeBooks for awhile and I'm 100% positive that they don't offer discounts to larger retailers - they charge 13.5% across the board. The 3x-4x multiple is an assumption though based on comparable companies and is definitely up for debate.

Rob,

Just did some double checking and I see that Boris (of Burda / Abebooks) purchased Techvibes last year.

I have to assume then that you know exactly the terms of the purchase and Abebooks revenue!

@ Who knew - I'm very familiar with AbeBooks business model, however all the numbers I used for my calculation are public and from their website. I don't have details on the purchase terms but CHEK News in Victoria is reporting that 'some' shareholders say that our estimate appears to be accurate.

http://www.tinyurl.com/cheknew

Rob,

Look at it from Amazon's viewpoint. They choose not to disclose the terms of a deal since it is non-material and they don't want to tip the market as to what they are paying. No doubt they also make Abe sign a confidentially and no shop agreement.

Hours later, a blog, owned by a large shareholder of Abe and part of the Burda empire, publishes an "estimate" of the deal value which then gets picked up and repeated everywhere.

Now you probably didn't know that your numbers would be used but how are Amazon execs going to feel about this? Either your guess is right and you have just let the secret out, or it is wrong and people are going to be wondering why the numbers were inflated.

Sure you used public information but the fact is that Boris knows exactly what the deal was. The whole episode makes it look like Abe is trying to shop the deal by disclosing a purchase price and then seeing who else comes to the plate.

Bad business in my opinion.

A couple things:

1. Amazon already had a taste of Abebooks and their prominence back when Abebooks Booksellers were able to sell their books through Amazon Marketplace, probably 3-4 years ago. Maybe Jeff B already had his eye on acquiring this company back then.

2. Check out who the current CFO is at Abebooks and have a look at the company he came from and what he helped do (I'll give you a hint - he got the company sold by Schneider Electric). Nice work Abebooks CFO!

Taking a closer look at the numbers, I would say Abebooks has a Subscription Fee Avg of $42/month that they receive from their Booksellers. Look at their homepage, 110 Million books, then have a look at their Subscription rates, divide the # total books by # booksellers (quoting Who Knew's numbers) and then you will get 8148 books on average. So that is $6.804 Million on Subscription Fees alone. Then add on the $190 million x 13.5% and you have another $26.65 Million added to that, bringing the total to $32,454,000.

After all is said and done I would say Abebooks is EASILY bringing in more then $3 Million/year even after EBITDA is taken into account. I don't think any experienced German head would allow their company to be less then 10% margin on their revenues, let alone 15%. So I would say Abebooks is probably bringing in more like a healthy $5 Million+/year once all is said and done.

And 8-12x EBITA is generous these days given ABE's flat merchant base and volume over the past few years and the general state of the economy and investments.

That brings us to $40M - $60M as I suggested.

Congrats to all parties involved. AbeBooks is a wicked resource and I'm sure Amazon will continue the tradition.

[...] Here’s a theoretical discussion of the financial aspects of the deal. [...]

Rob,

Thanks for putting the disclosure now on the article regarding Boris. My understanding is that he is the owner of Techvibes and not just the director however. Can you please confirm that.

@Who Knew - The disclosure line has been on this post since it was originally published this morning. And you'll find similar disclosure clauses on any blog posts related to companies that Techvibes Media Inc. directors are involved in.

How about some disclosure on your part? You commented on this blog from the same IP address with three different pseudonyms and fake email addresses. Maybe it's time for you to come clean??

Rob,

I have used the same name and a valid email address on all of my posts. Feel free to send me an email to verify.

If the disclosure has been there all along and I didn't see it until now then I apologize and retract my last comment.

[...] link can show you his depth of technology (he was a former CTO of Abebooks, so I imagine todays acquisition by Amazon will be good to him as well), I was more impressed by the fact that he has a Wikipedia [...]

Even a conservative 2.5 revenue multiple is still going to put this deal in the $75 Million area. I really doubt the CEO or the Management team would accept just any lowball offer but instead would hold out to make it worth their while.

Abebooks is a 50 Best Company, they have a great business model. Anything in the $60 Million area would in my opinion be insulting based on the revenue crunching.

Peter,

I think that we can all agree that regardless of price, the is a great deal for everyone and the ABE team did a fantastic job of putting this deal together.

Anyone who really wants to know what the deal was worth will be available to read it eventually in the Amazon financial statements so the exact number is mute at this point.

As Rob pointed out, it is always great to hear that the employees will be rewarded as well in this transaction through share ownership.

[...] coming week: Amazon purchased the company on August 1, 2008, for a reported $90 - $120 Million. Here’s the scoop from Rob Lewis over at Techvibes.com. [...]

[...] Source: Amazon, Marketwatch, Techvibes [...]

[...] Techvibes [...]

Amazon has released their Q3 results and in the process stated the value of their acquisitions during the period. According to Amazon, the value of Abebooks and Reflexive deals (which Amazon acquired in October) totalled $110M. Rumours are that Reflexive, which distributes online games, sold for about $80M which makes the Abebooks purchase worth about $30M.

As an aside, Abebooks shareholders have been told by management that the closing of the deal has now been delayed.