Etsy, which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, has signed a definitive agreement to acquire Elo7, a privately held marketplace for unique, handmade items, ranked as a top 10 eCommerce site in Brazil.
Etsy will acquire the business for US$217 million in cash, subject to certain adjustments for Elo7’s working capital, transaction expenses, cash, and indebtedness, and reduced by the value of certain equity awards of Etsy to be granted to Elo7 employees in connection with the transaction. Following the closing of the transaction, Elo7 will continue to be headquartered in Sāo Paulo, Brazil, and operate as a standalone marketplace run by its existing leadership team.
Considered a leader in ‘custom and made-to-order’ merchandise in Brazil with strong local brand awareness, the Elo7 marketplace connects approximately 1.9 million active buyers with approximately 56,000 active sellers and currently has approximately 8 million items for sale, the majority of which are made to order. Elo7’s marketplace includes items from over 40 retail categories, with more than 50% of gross merchandise sales (GMS) from “special event and life moment” categories such as wedding, baby, home decor, and children’s parties.
“Elo7 is the ‘Etsy of Brazil,’ with a purpose and business model similar to our own. Following our recent agreement to purchase Depop, we’re excited to bring another unique marketplace into the Etsy family. This transaction will establish a foothold for us in Latin America, an underpenetrated eCommerce region where Etsy currently does not have a meaningful customer base. We look forward to welcoming Elo7’s talented leadership team and employees to the Etsy family.”Josh Silverman, CEO, Etsy.
Compelling Strategic Rationale
|Etsy Marketplace M&A Criteria||Elo7 is an Ideal Fit|
|Aligns with Etsy’s mission, strategy and values||Elo7 shares Etsy’s mission to ‘Keep Commerce|
Human’ with a two-sided marketplace strategy
focused on creative microentrepreneurs.
|Expands Etsy’s TAM in a large and fast-growing|
market, category or geography
|Elo7 is expected to provide Etsy with a local brand|
in the fast growing Latin American market, where
ecommerce penetration is <10%; and Brazil is the
largest ecommerce market. The Latin American
ecommerce market is projected to reach
approximately $29 billion in 2021, with a 26%
CAGR forecasted through 2024.
|Market leadership, with authentic, organic brand|
|Elo7 is the ‘Etsy of Brazil’ known for handmade,|
non commoditized items. We believe Elo7 has
ample room to grow and differentiate itself versus
established ecommerce players.
|Shares Etsy’s two-sided marketplace business|
|Elo7 is a peer-to-peer marketplace with a capital-|
light business model and anticipated gross margin
profile similar to Etsy’s.
|Well positioned to benefit from Etsy’s expertise to|
accelerate growth and value creation
|Elo7 is an early stage business that we believe|
can leverage Etsy’s proven value creation
roadmap to drive further growth and profitability.
“Etsy has always been an inspiration and a reference for us, and we’re excited to continue our growth journey as part of Etsy – a company whose mission and culture so closely match our own. We’re looking forward to leveraging Etsy’s product and marketing expertise to help the Elo7 marketplace, community, and team achieve our full potential in Brazil.”Carlos Curioni, CEO, Elo7 CEO
“We’re excited to announce this purchase of Elo7 following our recent announcement of the Depop transaction – two exciting businesses that meet Etsy’s very high bar for use of capital. In addition to job one, which is continuing to drive growth in our core Etsy.com marketplace, we will now focus on integrating Depop and Elo7 into the Etsy family. Reverb, Depop, and Elo7 will each continue to be run by their talented and empowered management teams, and we’ll connect key functions across the brands in a way designed to accelerate value creation and make the whole worth more than the sum of its parts.”Rachel Glaser, CFO, Etsy.
Etsy, Inc’s House of Brands Portfolio
Following the close of the acquisition of Elo7 and the recently announced transaction with Depop, Etsy, Inc. will operate four highly differentiated, non-commoditized, and loved eCommerce brands: Etsy, Reverb, Depop, and Elo7. These businesses all share similar levers of growth to unlock value, including improving search and discovery, building human connections, and making selling and buying easier. The marketplaces will operate independently while benefiting from shared expertise in product, marketing, technology, and customer support.
Other Transaction Details
In the near term, Elo7’s current run rate for GMS and revenue is expected to be neutral to Etsy’s top-line results and modestly dilutive to adjusted EBITDA margin. The transaction is currently expected to close during the third quarter of 2021, subject to satisfaction of customary closing conditions.
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