Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
By acquiring outdoor sports gear retailer Backcountry.com, Liberty Media now controls four of the Top 500 online retailers. The company says it will keeping looking for additional e-commerce properties. The deal also represents the strong demand for niche online retailing, experts say.
Taking time out from completing deals to buy the Atlanta Braves baseball team and the DirecTV satellite television system, John Malone’s Liberty Media last month scooped up another Internet retailer. And the company says it is looking to buy other e-commerce properties.
“We’re happy with the progress on these fronts and continue to look for more e-commerce acquisitions,” Greg Maffei, Liberty Media’s president and CEO, told analysts a day after Liberty announced plans to acquire outdoor gear retailer Backcountry.com.
And Liberty, which has a market capitalization of $31 billion, is not the only investor with deep pockets scouting for retail acquisitions, says Jim Okamura, a senior partner at consulting firm J.C. Williams.
“Retail as a sector is drawing the interest of the big war chests,” Okamura says. “The Liberty Media acquisition indicates this is not just happening at the level of big companies, but also at niche direct retailers. It acknowledges the upside potential of these niches.”
In acquiring Backcountry.com, Liberty Media adds a fast-growing online retailer whose sales roughly tripled from $27.5 million in 2004 to $82.1 million last year. Backcountry.com is No. 126 in the Internet Retailer Top 500 Guide and fourth among online merchants of sporting goods. The purchase price was not disclosed.
“This investment in Backcountry represents another step in our stated strategy to seek acquisitions of commerce companies that have unique value propositions, outstanding management teams and strong track records,” says Michael Zeisser, senior vice president of Liberty Media. Backcountry.com’s senior management, including CEO Jim Holland and president John Bresee, will stay on.
Four in Top 500
The deal gives Liberty Media, led by cable television mogul Malone, control of four of the Top 500 Internet retailers as well as travel site Expedia. The largest of the e-retailers by far is home shopping company QVC, which last month reported revenue of $1.68 billion in the first quarter of 2007, up 8.3% from $1.56 billion in the same quarter a year ago. QVC generated 22.8% of that first-quarter revenue online.
Liberty’s other online retailers include IAC/Interactive Corp., No. 23 in the Internet Retailer Top 500 Guide; Provide Commerce Inc., No. 56; and BuySeasons Inc., No. 204. Not counting QVC, Maffei says Liberty Media will have invested $630 million in online retailers once the Backcountry.com deal closes later this year. He says that amounts to 15 times the free cash flow those smaller e-commerce properties generated in 2006, and predicts growth in operating cash flow from the e-commerce businesses of more than 20% a year.
Backcountry.com hopes to gain from being part of Liberty Media, including picking up sales tips from QVC, says Backcountry.com CEO Holland. He notes that QVC has lots of experience with the “one deal at a time” model-a single item, usually an overstocked product purchased at a discount from a supplier, is sold until it sells out-that Backcountry.com uses on its steepandcheap.com and whiskeymilitia.com web sites.
Holland wants to learn from QVC how to improve customer conversion on such sites. “Those guys have definitely mastered the adrenaline factor; they have it down to a science.”
Holland says being part of a larger company with international experience may also allow Backcountry.com to obtain lower prices on everything from credit card transaction fees to shipping supplies, to move more quickly to produce its own branded products abroad, and to sell more easily to customers in other countries.
“We turn away a lot of orders internationally,” in part because of supplier agreements that prevent Backcountry.com from selling in some countries, but also because of the customs regulations and the challenges involved in selling and delivering items to consumers in other countries, Holland says.
QVC has shopping sites targeting the United Kingdom, Germany and Japan. “They’ve figured a lot of this stuff out,” Holland says. “Having some wise advisors can help us shortcut some lessons.”
Finally, Holland says he might pursue acquisitions that could complement his existing products. With Backcountry.com doing most of its business during the winter ski season and around the holidays, Holland says he would like to add a product line that would sell well during the summer.