Companies often pursue the avenue of mergers and acquisitions to foster a company’s growth or a way to buy out the competition. For the Pearl West Group, M&A is a means to fast growth and scalability. Jason Kwan, the Chairman and President of the company, details why they have chosen this route instead of solely organic growth via Amazon.
The company that is also a seller of Amazon brands was formed out of the need to build something that can scale quickly. Jason states, “after running the digital ad agency for ten years, I figured I had accumulated enough marketing and business knowledge to pursue other ventures. I wanted to build something that can scale quickly. We had accumulated a lot of capital in our business that we wanted to use to take advantage of our expertise and experience.” After much research, Kwan and his team formed the Pearl West Group as a strategic acquirer of Amazon brands.
Mergers and Acquisitions in the Amazon Marketplace
Amazon has seen exponential growth, especially with the restrictions presented by the pandemic. Companies have identified this marketplace to grow their presence and, for others like Pearl West Group, a way to acquire businesses. “We chose Amazon businesses because Amazon’s marketplace is increasing organically every year. We also felt these types of businesses align with our previous experience and expertise. Our long-term vision for the company is to build a global digitally native consumer brands corporation. We want to be 1 of the top 10 sellers on Amazon, have great brand exposure through other DTC channels, and, more importantly, have a lot of fun doing it.”
Mergers and Acquisitions Facilitates Economies of Scale
Economies of scale are the cost advantages that enterprises obtain due to their operation scale, with cost per unit of output decreasing which causes scale increasing. When companies acquire other brands, they can pool resources to improve efficiencies. “We use the role of M&A to grow quicker. As we scale and purchase more Amazon brands, we’re enjoying the benefits of economies of scale. We can share resources amongst all the brands in our portfolio from supply chain management, customer service, accounting services, and all other areas of expertise. And because of that, we’re able to reduce our costs tremendously without sabotaging quality so we can provide the best value for our customers on Amazon. “
Mergers and Acquisitions Require Detailed Evaluation
To grow from an acquisition, a company would have done the necessary research and analysis to determine if the transaction will lead to success. Kwan highlights that Pearl West Group takes companies through a detailed evaluation before deciding. “When we’re looking for acquisitions, we evaluate the businesses based on the sustainability of their earnings. We want to understand if sales will be at risk in the future and whether we could do anything about it. We look at the market share and ranking placements that the business has and if it’s difficult for competitors to steal that away. But the reality is that we’re very flexible, and we’re open to looking at everything that sells on Amazon.”