E-Commerce spending continues, as a surprise to many
Panther Equity Insights -- a private equity newsletter covering all things IT, Tech, Business Services, eCommerce and Markets.
Happy Wednesday folks! Welcome back to this week's edition of Panther Equity Insights, the bi-weekly newsletter from Panther Equity Group.
This week we’re looking at:
The Growing E-Commerce Market
Industry Commentary on the tech rally, TMT M&A, and MSPs
Private market insights on the Latest Updates in US PE
Our aim is to provide you with the latest insights and advancements in these verticals, along with valuable perspectives. We strive to create a newsletter that is informative and thought-provoking for all market participants.
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Our team is focused on making investments within the IT Services, Technology Services, Business Services & eCommerce verticals. Along with our operating partners, we have decades of experience paired with a vast network of experienced executives and LP investors.
Size: EBITDA of $2 million – $12 million
Geography: U.S. or Canada headquarters
Target Transaction: Majority, significant minority, and structured equity investments
Business Profile: Founder or closely-held ownership with an experienced management team
Additionally, Panther is actively looking for ‘add-on’ investments that meet the following criteria:
Industry: IT Digital Transformation / Software Dev 💻
Size: Up to $4 million in EBITDA
Geography: Flexible
Target Transaction: Majority recapitalization
If you’re a Founder / Shareholder interested in working with Panther, or an intermediary with a deal to share — feel free to reach out and get in touch with us! We are happy to compensate fees to intermediaries & referrals at market levels.
Broader Market Chatter
US E-Commerce Sales Reach New Records
The expansion of e-commerce continues to grow and reach new heights, according to analysis by DigitalCommerce and the latest data from the U.S. Department of Commerce. This aligns with the broader tech growth shaped by digitalization as the defining tailwind. Despite weakened tech deal activity, most segments grew significantly in terms of revenue and profitability, and the latest data confirms this for e-commerce.
The increasing penetration rate is also reflected in the e-commerce market’s 7.6% expansion last year, as seen in the chart above. Though it seems like a notable deceleration compared to the extraordinary surges seen during the pandemic, the market is maintaining consistent, high growth rates rather than reversing back to brick-and-mortar, demonstrating that global digitalization shifts are here for the long-term.
The e-commerce market far outpaced the overall retail sales market, which experienced a more modest growth rate of 3.8%. This slower yet steady growth trajectory in e-commerce contributed significantly to the overall retail landscape, with U.S. ecommerce sales reaching approximately $1.119 trillion in 2023, up from $1.040 trillion in 2022.
E-Commerce Growth to remain Resilient going Forward
The resilience and continuous growth of e-commerce is demonstrated by its performance over turbulent quarters. Since Q2 2009, e-commerce sales have experienced growth in every quarter, even during periods of economic downturn.
This resilience stems from the overall trend in total retail sales, which have similarly demonstrated growth in every quarter since 2009. Outside of the Great Recession period, total U.S. retail sales have not experienced an annual decline. The e-commerce market is expected to grow alongside the retail market, though at an elevated pace due to its increasing penetration.
Looking at annualized data above, e-commerce has grown at stable, double-digit rates over the past decade, excluding the boom experienced in 2020. James Risley, research data manager at DigitalCommerce, notes that while e-commerce growth has moderated due to a slower economy, it still accounts for nearly half of total retail growth in the country.
Risley believes this signifies a normalization in consumer behavior and the retail market's adaptation to post-COVID conditions. This indicates a possible return to pre-pandemic levels growth between 10-15% once the economy picks up again.
E-commerce investors and operators should not view the growth decline between 2020-2023 as a weakening market, but as a resilient one that is poised to deliver strong, resilient growth moving forward. Continued Investments in e-commerce capabilities will be essential to keep companies adaptive to the evolving market.
About Us
Panther Equity Group is a private equity firm focused on making investments within the IT Services, Technology Services, Business Services & eCommerce verticals.
Our team and Operating Partners have decades of experience within our focus verticals along with a vast network of experienced operators and LP investors.
We have the Operational, Technology, M&A, Business Development, and industry-specific Strategy expertise to help companies accelerate their growth and reach their full potential. Learn more about Panther Equity Group by heading over to our website:
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Industry Commentary
Managed Services
📖 Capitalising on a new class of managed services
TMT M&A
🎤 Thoughtful M&A strategies are key to growth in tech, media, and telecom
If you’re a company Founder / Shareholder interested in working with Panther, a deal maker interested in connecting or with a deal to share, or an Operating Executive looking for a part-time, full-time, or a Board Level Role — feel free to get in touch with us!
Private Market Movements
Responding to the dynamic shifts in the market landscape, major US PE firms are strategically adjusting their positions to align with growth opportunities. With LBOs facing headwinds from costly credit, some private equity investors are finding new ways to maintain growth and expansion.
Operations has grown to become a major differentiator, but fundraising success is in the spotlight as well. A key focus for funds in 2024 is expanding their investor bases in anticipation of the recovery in private investments and M&A, driven by impending interest rate cuts and an improving economic outlook.
One of the most significant strategic shifts observed over the past year involves GPs actively seeking new avenues to attract capital. To achieve this objective, GPs have introduced new investment vehicles aimed at engaging a broader spectrum of investors, particularly individual investors.
This trend is reflected in Pitchbook’s fundraising data above. Using figures from publicly listed fund managers as a market indicator, a consistent uptrend in AUM is seen throughout 2023 despite challenging market conditions.
Significant capital inflows were seen in Q4 2023, mostly attributed to both new investors and sustained investment traction in specific sectors. A steadily growing AUM, even throughout the difficult conditions of 2023, points to continued optimism towards private equity as an asset class throughout cycles.
Earnings Growth Sustained in Q4
Another insight seen in looking at publicly available PE data is that earnings saw a modest recovery in Q4 2023, with every major firm seeing a moderate uptick. Analysts assume even more favorable data in the mid-market, as smaller transactions have not been impacted as much as larger ones.
The data indicates a broader PE recovery may already be happening as firms continue demonstrating operational success despite the challenging market. As rate cuts near, the recovery is expected to become more pronounced since deal economics will be more favorable. Investors that persevere throughout the downmarket will be rewarded most once full recovery takes place.
About Panther Equity Group
Panther Equity Group is a private equity sponsor seeking to provide capital, strategic support, and resources to healthy & well-positioned private companies in the lower middle market. We typically focus on companies with $2 million - $12 million in EBITDA and seek to make majority or significant minority equity investments.