DTC businesses are an attractive takeover target because they can help corporates achieve their strategic intentions. These include:
Expand consumer reach. The consumer populations of DTC businesses are often younger and quicker to adopt emerging trends. Access to that group was a key driver of Movado Group’s 2017 acquisition of upstart brand MVMT, which sells affordable watches and accessories with help from a significant presence on social media. Serta Simmons followed a similar pattern when it purchased DTC mattress company Tuft & Needle in 2018. The tie-up offered the chance for Serta Simmons to expand beyond its traditional brick-and-mortar channels to reach generally younger bed-in-a-box consumers.
Acquire capabilities. DTC businesses come with digital capabilities that the acquirer can plug into its own business. In this respect, sometimes the brand or product is of less interest than the people and know-how. MVMT came with an experienced management team that could advance Movado’s Digital Center of Excellence initiative. At Serta Simmons, Tuft & Needle’s co-founders have been helping to shake up product lines, ramp up direct channels and change the company’s approach to marketing.
On the other side of the transaction, acquisitions often appeal to DTC brands as a way to tap into the well-developed logistics, marketing and human resources operations of an acquiring company. In addition, a corporate owner can likely help with wider brand marketing and provide access to new channels, which drives brand awareness and creates avenues for reaching a new set of consumers. Since its 2018 sale to Kroger, Home Chef has brought its meal kits into the supermarket company’s stores even as it maintains its ecommerce business. Meanwhile, Tuft & Needle mattresses are now available at Lowe’s and Crate & Barrel along with brick-and-mortar locations under its own brand. Serta Simmons’ capital and expertise fueled much of this expansion.