Homestead Brands, an e-retailer of home and outdoor goods, is focused on revenue and EBITDA growth before weighing a stake sale to a private equity firm, said Brenden Marquardt, CEO and co-founder.
The Austin-Texas based company, which expects revenue of USD 10m this year, could look at bringing on a financial sponsor in as early as 24 months, he said. It is tracking towards generating USD 20m to USD 25m in revenue by then and hopes to reach USD 3m to USD 5m in EBITDA, he added. After that milestone, onboarding private equity investors could assist with scale and take the company to its next stage of growth, he added.
Homestead would likely sell a majority stake in the event of a transaction, said Marquardt. He and his brother Kyle launched the business in 2014 and remain its sole owners. He added that the brothers would retain a minority stake and remain involved in the business post-deal.
Homestead is receptive to private equity approaches to build relationships even if now is not the right time to execute a deal, he said. He noted that he and his brother are patient and willing to “play the long game” by continuing to operate as a bootstrapped company, in the event that a PE deal doesn’t make sense.
In the meantime, Homestead is keeping an eye out for acquisitions of e-commerce brands, he said. The market conditions and supply chain slowdowns are hammering many e-commerce players, making it an attractive time to be an acquirer, he explained. Multiples are down, prices are better for buyers, and access to capital is drying up, creating opportunities to acquire distressed or struggling e-commerce brands.
It is in discussions with a variety of potential targets focused on e-commerce home goods and outdoor living, Marquardt said. Targets with niche products that bring people together but are struggling with scale would make sense for Homestead to acquire.
Homestead has made two acquisitions to date: Lori Wall Beds, a maker of murphy beds, and Organic Swings Brands, an outdoor swing maker. Terms of the deals were not disclosed.
Valuations of ecommerce players range from 3x to 4x EBITDA, down from 2021 multiples of 4x to 6x EBITDA, according to Marquardt.
Homestead, which landed in the Inc. 5000 list this year having achieved 3,000% growth, attributes its hockey stick growth to the pandemic, he said. As people shifted to working from home, they looked for options to combine home offices and guest living spaces, and Homestead offered an option to make the most of their living spaces.
The company designs its own products and works with third-party manufacturers to ship them, the CEO said, adding that it is not a drop shipper, he noted.
It uses a variety of outside legal counsel as needed, he said.
