Due diligence is widely regarded as one of the most essential functions of Amazon aggregators.
And with the relentless speed at which smaller Amazon FBA businesses are continuing to be acquired in 2022, the importance of robust ‘DD’ cannot be underestimated.
Of the many components that constitute due diligence, Intellectual Property (or I.P) is something that is often overlooked by the seller. Amazon FBA aggregators, however, see I.P as a marker of a seller’s passion for their business.
If a seller has put in the effort of registering Trademarks, for example, it follows that they’ve probably shown ‘due diligence’ across their entire business.
Many FBA sellers will have looked at what I.P involves and asked themselves ‘Is it worth it?’. Here’s why we think you should definitely consider going that extra mile.
Amazon Aggregators expanding FBA Brands into the global marketplace
If you’re a national, rather than an international FBA seller, you may only have registered your brand in the UK (or your country of residence). Aggregators who want to buy your business are probably looking to expand it alongside other like products (the portfolio). This is the very nature of aggregators’ existence.
Their brands or like products may not all (if any) be based in the same country as your FBA business. That would mean the aggregator, in order to protect your brand overseas, needs to register the Trademark wherever they intend to sell.
As well as having to register it themselves, it also could provide an unforeseen headache. This is especially true if you import your product from far-flung destinations.
Bad faith Trademarks
If you’ve built up an FBA business that piques an aggregator’s interest, e.g. $1m plus in EBITDA (earnings before interest, taxes, depreciation, and amortization), you’ve probably had to rely on imports from countries. This could be down to expertise, material or because the labour rate is lower than in Europe and North America.
One of the first things aggregators do when they have a portfolio of like products and brands is to streamline that portfolio’s supply chain. There’s no guarantee they’ll use the same supplier as you have for your white label business.
This could trigger what’s known as ‘bad faith’ Trademarks and patents. Chinese suppliers are renowned for it.
It may be that you pull your orders from them and/or switch factories. It could just be that one of your supplier’s competitors is looking to hit a low blow by registering the Trademark for your product. Even if they’ve played no part in its conception or manufacture.
That competitor or previous supplier can then tie the supply chain up in knots. If they own your Trademark in their country, they can even tie up your container at the docks. At that point, you have very little recourse open to you.
Go the extra mile
So, if your FBA business relies on branding and Trademarks and you’re looking to sell to an aggregator, go that extra mile. Look at countries that sell products similar to yours, including potential manufacturing plants, and own your intellectual property.
For UK FBA business owners, the Intellectual Property Office offers key advice about Protecting your UK intellectual property abroad.
It’s the safest way to protect your brand. It’s also a key consideration in the due diligence process of selling your FBA business to an aggregator. And, as aggregators become more choosy (which they are), it could be the difference between you receiving the offer your business deserves and not.
Further reading:
This website was created by ex-Amazon sellers, Martin Smith and Richard Turnbull.
To learn about our story, our private label FBA brands, and our first-hand experience selling to Amazon aggregators, click here.
You may also wish to check out our 2022 Definitive Guide to Amazon Aggregators.
Written for FBA sellers, this simple, easy to follow document takes less than 5 minutes to read. And represents the culmination of over 100 hours of research into the Amazon aggregator space. To access the guide today, click this link.
