EMERGE Commerce makes its long-anticipated trading debut on the TSX Venture Exchange under TSXV: ECOM.

During these unprecedented times, it’s no secret that the e-commerce sector has skyrocketed, experiencing more growth this year than it has over the prior decade. Global e-commerce giant Amazon has only recently attained profitability after 20 years but that hasn’t stopped it from becoming one of the most valuable businesses on the planet. Earlier this year, tech darling Shopify surpassed the Royal Bank of Canada for the title of the largest publicly listed company in Canada. But that’s not all, a number of exhilarating startups have sprung up in recent years offering a fresh take on scaling e-commerce at a time when retail dollars inevitably continue to shift online in record numbers.

Enter EMERGE Commerce, the not-so-quiet rebel in the e-commerce race. The company just made its public trading debut on the TSX Venture Exchange today, fittingly under ticker TSXV: ECOM. EMERGE is one of Canada’s fastest-growing companies, with a whopping three-year revenue growth rate of 2,203 percent, having recently made the Globe and Mail’s 2020 top growing companies.

EMERGE CEO Ghassan Halazon believes his company has found the secret to scaling e-commerce brands the more efficient way—by buying them, rather than building them. 

The company acquires and operates established niche e-commerce brands under a shared platform and playbook, offering portfolio companies best-in-class technology, teams, and data-driven cross-selling opportunities across the network. At the heart of EMERGE’s consolidation thesis is the fact that small-to-medium-sized e-commerce businesses can gain by pooling resources together under EMERGE to arrive at a profitable scale in such a way that is not accessible to them on a standalone basis.

Here’s how he describes EMERGE’s place on the e-commerce map: “It’s no secret that Amazon is building a global retail empire. Shopify is making waves in its quest to ‘arm the rebels’, a reference to empowering the scrappy direct-to-consumer e-commerce brands to compete. EMERGE is on a mission to acquire the highest quality, most profitable rebels out there and, in the process, form one of the world’s dominant e-commerce portfolios.”

It’s still early days, Halazon is quick to point out, but in just four years, EMERGE has amassed 2 million members across North America, counting some of Canada’s most coveted consumer brands in its network including UnderPar.com, WagJag.com, JustGolfStuff.ca, and newly launched BeRightBack.ca, a dedicated portal for staycations at a time when travelers are looking to escape nearby.

EMERGE’s shareholder base includes various prominent e-commerce and technology veterans such as Drew Green, Chairman and CEO of INDOCHINO, and Michele Romanow, Dragons’ Den personality and Clearbanc founder, who became a shareholder after Buytopia joined EMERGE. More recently, John Kim, an award-winning institutional investor, joined EMERGE’s board of directors. Notably, John sits on the board of Well Health Technologies, a fast-growing health tech business with a market capitalization in excess of $1 billion.

EMERGE’s Consolidation Strategy 

The company’s forward-looking acquisition strategy is focused on bootstrapped e-commerce businesses in the range of $5-50M revenue and $1-5M profit.

“What an e-commerce company requires to grow from zero to $10M is very different than what it takes to scale from $10M to $100M,” explains Halazon, a veteran e-commerce operator with a decade under his built. 

There are a few reasons EMERGE favors small bootstrapped e-commerce businesses as acquisition targets. First, it happens to be an underserved market from a buyer’s perspective. “Global e-commerce giants are focused on much larger acquisitions, leaving the small-mid cap e-commerce opportunity wide open. This translates to realistic valuations grounded in the realities of where the business is actually at,” he continued.

The second reason is that bootstrapped e-commerce companies typically come with no or few external investors, and by default, profitability is built into the operator’s DNA. In these circumstances, the founder of the e-commerce business often has the decision-making power to move on a win-win transaction with EMERGE. In contrast, venture capital-backed e-commerce startups often come with high valuation threshold expectations and complex cap tables making it more challenging to find alignment to get a deal done.

Post-acquisition, EMERGE aims to buy and hold, rather than “flip” e-commerce companies as most private equity funds aim to achieve. EMERGE typically keeps entire teams intact while also adding value and resources via a universal playbook of tried and tested strategies to boost success for e-commerce sites. 

In late 2019, EMERGE acquired UnderPar.com, the market leader in golf experiences in Canada, with a fast-growing presence in the US. EMERGE paid approximately $12M for the business, which Halazon describes as, “a fair multiple of EBITDA.” UnderPar’s brand, team, and offices were maintained.

“Occasionally, we’ll also pull the trigger on distressed acquisitions too, whereby we can pick up select quality assets that are out of favour, at opportune prices. Those are a lot more work though,” admits Halazon. In late 2017, Torstar Corp. wanted to exit their online deals business, WagJag.com, during a time when it was restructuring its digital arm, so EMERGE stepped in and scooped up the key assets, including the brand and premium customer base, for just $500,000. Since then WagJag.com has driven close to $30M in gross merchandise value (GMV), and recouped the entire purchase price in just six months.

IPO Climate 

As 2020 winds down, e-commerce stocks like Amazon, Shopify, and Wayfair are hovering around all-time highs, and it has been a record-shattering year for blockbuster technology IPOs, with jaw-dropping trading debuts from DoorDash and AirBnB last week. 

Earlier this year, EMERGE decided to go public on the TSX Venture Exchange. The Company successfully raised $9M in a go public financing brokered by Canaccord Genuity, Gravitas Securities, and Haywood Securities. The virtual raise was one of the first of its kind in a post-pandemic world.

EMERGE opted for the go public route in large part to accelerate its ambitious acquisition roadmap. “There are thousands of small, quality bootstrapped e-commerce companies out there. Our aspiration is to have EMERGE stand out over time as a disciplined, diversified, founder-friendly acquirer of top e-commerce brands” said Halazon.