Highlights
- Supplement brands attract buyers from consumer health groups to private equity, because customers keep reordering.
- Buyers look hard at claims, formulas, testing, recurring revenue, and whether the business depends on one channel.
- In Seb's exit, more than 300 buyers were approached, and the competition led to a multimillion-dollar exit.
Thanks to Nextoria, we had a multimillion-dollar exit. The biggest reason I'd recommend them: they'll work harder than you will.
Seb D.Founder
Why buyers like supplement brands
A good supplement brand sells something people take every day and buy again every month. That repeat purchase, often through subscriptions, is what buyers pay for: it makes revenue more predictable than for most consumer products.
The buyers range from some of the biggest names in consumer goods to private equity funds, in three main groups:
Strategic buyers
Consumer health, pharma and food groups
Adding a brand, a product category or a new market.
Private equity
Funds and the platforms they back
Building a group of brands, or growing one.
Supplement companies
Other brands and multi-brand groups
Buying a competitor or a complementary range.
The right buyer can be anywhere in the world: a pharma group on another continent, a family-owned consumer group expanding into your category, or a competitor looking for scale.
What buyers check in a supplements business
Supplements are lightly regulated before they reach the shelf, and heavily scrutinised once someone wants to buy the company. In the US, the FDA doesn't approve supplements before they're sold: the brand is responsible for making sure its products are safe and correctly labelled. In the UK and the EU, supplements are regulated as food, and only authorised health claims may be used. A buyer takes on all of that history when it buys your company, so it will check it carefully.
Supplements due diligence
Claims. What you say about your products is the first thing a buyer looks at, on your labels, your website, your Amazon listings and your ads. In the US, claims about how a product affects the body must carry the FDA disclaimer, and the FTC expects solid scientific evidence behind health claims. In Great Britain, only claims on the government's authorised register may be used, and the EU has its own authorised list.
Formulas and supply chain. Most brands use a contract manufacturer, so the first question is who owns the formulas. If it's your manufacturer rather than your brand, that's typically a deal-breaker: the buyer would be paying for a brand it can't make anywhere else. Buyers will also look at your manufacturer's quality standards, your agreement with it, and whether you have a backup supplier.
Testing. Buyers want the paper trail: certificates of analysis for each batch, complaint logs, and any recalls. A single, well-handled issue worries them less than repeated ones.
Channel mix. Many supplement brands grew on Amazon, and buyers will look at how much of your sales depend on one marketplace, one retailer or a handful of listings. On Amazon, they'll also check your account health and reviews: Amazon has steadily tightened its rules for supplements since 2020, and now asks sellers for independent, third-party checks on how their products are made.
Recurring revenue. Subscriptions and customers who reorder every month are what buyers pay most for, so they'll look closely at how many customers come back, and for how long.
Stock. Supplements expire, so buyers will check how old your stock is and how much is close to its date.
None of this is unusual for a well-run brand. But the founders who sell best have the documents ready before the first buyer asks. For the finances, read 5 accounting tips if you plan to exit your consumer business.
Interview: Seb on selling his supplements brand
A supplement brand selling mainly on Amazon in the UK, built over more than five years
Seb D., with his business partners
More than 300 approached worldwide, including global pharma groups
A multimillion-dollar exit
Exclusive sell-side advisor
Seb and his partners had built one of the leading supplement brands on Amazon in the UK, with a best-selling product past 35,000 reviews: profitable, growing, and attractive to buyers. We asked him how the sale went. His answers are lightly edited.
How did you choose an advisor?
I probably spoke to about ten different people. Some of them claimed they were the experts in the industry, some claimed they'd sold the most businesses. I didn't get a good feeling with any of them, so I crossed all ten off the list.
Then I spoke to two companies, and Nextoria blew the other one out of the water on every front: the amount of data they had on our business, and on our industry. It didn't feel like a sales pitch. It felt like a comfortable conversation where they were offering advice and value before we'd even signed.
How did you find buyers?
Within 24 hours I had a list of companies I'd never even heard of, from places I'd never even heard of, with large amounts of funds and ready to start bidding. Before I knew it, I was having meetings with public companies with massive market caps. Some of the names were among the biggest pharma companies in the world.
They also asked if there was anyone I could think of. I found one company I'd tried to approach myself three years earlier, and never heard back from. They found the right contact, wrote to them about our brand, and got a response.
That's when it clicked: you need an M&A team that is global, that speaks the different languages and can get through to the people who actually make decisions. I was speaking to a large company in India, to companies in Germany.
How did the negotiation go?
With more buyers at the table, you can start to play them off each other. And you've got someone thinking for you who is much better at negotiating than you would be. The team would say: this is what we're going to say, are you okay with it?
Going into this, we were hearing of deals with 75 or 80% paid upfront. We ended up getting 90% upfront. It's not just the 90%, or the multiple: it's also the details in the background, like how the earn-outs work.
What happened after the LOI?
I thought they'd find the buyers and then fall away into the background. But even once we'd signed the LOI and were in due diligence, they were right in the middle, defusing situations where I might be getting emotional, and bringing logic to it. Having a team that had been through it time and time again brought a level of sanity to the deal.
Was there a moment you wanted to walk away?
There were three or four sticking points where the negotiation got really tough, and a couple of moments where I said: we've got to walk away, this deal doesn't work for me. They had put hundreds of hours into it and hadn't received a penny. They were due a larger sum if the deal went through that week. And they fully supported me, and were ready to start finding a new buyer.
What was it like working with us day to day?
It was straight to the point, on WhatsApp or Zoom whenever we wanted. I was texting the team at 11pm and they replied straight away. Towards the end, in the heavy negotiation, they were on calls with me at 1am getting the deal done. They will work as hard as you, if not harder.
Six or seven weeks in, it felt like I was speaking to them more than to a lot of my family members. With my business partners, there was nothing we held back: we talked openly with them about our feelings, our expectations and where we'd go from there.
Could you have done it yourself?
I don't think I could replicate what they did. I'd need a lot more money, and probably five or six employees, with different languages and different expertise. And then I'd have to manage them all. I couldn't do it.
What Seb's exit shows
Thinking about selling your own consumer brand? Start with How to prepare your consumer business for exit.
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Interview recorded in April 2024