The American e-commerce company Etsy has announced it will buy Depop, an online fashion marketplace, for $1.625 billion. Following the acquisition, Etsy will own and operate three distinct brands for consumers (Esty, Reverb, and Depop).
Depop is a fast-growing platform which has increased revenues at a CAGR of almost 80% from 2017-2020. Based on the transaction price, Etsy is clearly expecting this aggressive growth to continue, as Depop only produced $70 million in revenue during 2020. While the company does expect the deal to be accretive to its top line growth rate in the coming years, it will be modestly dilutive to its current EBITDA margins.
The key driver behind this acquisition appears to be the demographic which Depop appeals to most - Gen Z. About 90% of the platform’s traffic comes from users under the age of 26, so the buying power of its key demographic is likely to grow significantly in the coming years.
The transaction is expected to close in the third quarter of this year, and the $1.625 billion price tag will be paid using mostly cash. Goldman Sachs and Credit Suisse served as financial advisors to Etsy and Depop, respectively, on the deal.