Bahman Nedaei & Zahir Dehnadi founded navabi in 2010. I interviewed them recently about their growth over the years. In the months since that interview, the team have successfully grown and sold the business. I thought it would be useful for readers to catch up and find out why they sold, how it happened, and what happens next. I spoke to Bahman, Zahir, and Dan Barker, who worked on the deal.
- navabi sold for an undisclosed double digit million amount, including but not limited to a 10 Mil $ fixed cash component
- The founders bought back the business from investors last year when the pandemic caused high risk and high uncertainty for the business owners
- The strategic buyer sees navabi’s value in its founders and management’s exceptional expertise, with whom they plan to rapidly enter the European market
- Prior to the pandemic navabi was a 70M $ Gross Revenue business with over 120 team members
- The buyer plans to keep navabi and its team as it is and invest to grow the business across Europe
This interview covers the key points of how the deal took place, with the idea that other ecommerce companies may understand how this type of deal happens, and to understand the future of the business.
How it Happened – 7 Lessons
1. On selling – and the reason for the purchase:
Bahman explained it was a strategic purchase. The buyer is called CCX – City Chic Collective. They are an Australian business, listed on the stock market there. They also own a company called Avenue in the USA and Evans in the UK, and their own brand City Chic in Australia. The plus size women’s fashion market is quite large globally, but there are few well known brands. Their plan is to continue navabi – the brand and its team – as Europe’s number 1 women’s plus size fashion retailer. This was the primary consideration for the management: Finding a good home for the brand and the team, and making sure the story they’d worked on all those years continues and succeeds, serving the same customers who have been loyal all these years.
Bahman says he believes the ideal outcome for an ecommerce founder selling is that four groups of people are happy: the buyer, the seller, the team and the customers. He’s keen to point out that does not simply mean finances, and in fact though that’s often something people focus on externally, the price is really just one priority next to others that may be higher.
2. On deciding to sell:
Bahman and the management team had actually been working on a strategy update going forward for a few months. They had done a lot of research on the overall market, and where they wanted to take things next. It had been a strange 12 months, as the business had got into difficulty due to the pandemic, which hit German fashion particularly strongly, particularly in their market where two key categories were occasionwear and workwear (difficult when customers were working from home, and occasions such as weddings were all postponed). They very consciously took the decision to push and make sure they took the business back to strength – they felt they owed it to customers, and to the team.
They had reached that stage, where the business was back to a good state of profitability, where they as a team had created that, and were in the middle of reworking strategy, when the opportunity arose which aligned with the direction they believed sensible for the business…
3. On how the opportunity came about:
The eventual buyer had been in touch late in 2020, having heard that navabi had been reacquired by its original founders from their investors. It was not the right time for the buyer at that point, and they felt it too risky as a proposition at that point, but each party decided to stay in touch.
The buyer – CCX – had ended up buying a UK business (Evans) following their discussions last year which was part of the Arcadia Group along with Topshop and many others. Having successfully concluded that purchase and moved on, they spoke to navabi once again, and were impressed with how the management team had turned things around from their risky mid-pandemic point. Navabi’s founders went through key priorities for the business, and, with the buyer, mutually decided it was the right time, and that the team could add value to CCX.
4. On the purchase price:
Bahman says that’s an odd topic. Having been on the edges of lots of sale processes over the years, and after a while realising the prices you see publicly are often different to what actually happened within the deal – sometimes including earn outs, sometimes including shares, sometimes including other elements – he believes it is best not to talk about it, other than to say that the founders are happy with the deal and that the brand will go on to great things, and the new owners are happy with how it will fit in their overall portfolio. Bahman says they achieved their main aim which was to make sure that the brand continues, the story continues, and the loyal customers who’ve supported them all these years continue to receive great service and a great product.
5. On the process of selling:
The process was extremely fast, actually just a matter of weeks. The team at navabi had raised funds a few times over the years, and had learned that the pace really depends on just a few things:
1. The speed at which the parties involved want to get things done.
2. The number of parties involved.
3. The state of the systems, and the state of the numbers.
4. And, of course, both parties have to reach agreement on the terms, which is usually a process rather than a one-off.
For the first there – each party wanted to either move to a conclusion quickly, or to reach a point where they may decide not to go ahead quickly.
The number of parties involved was mainly just the two. Of course there was due diligence from third parties, and lawyers and accountants involved, but the management teams simplified matters by working directly with each other.
From a numbers and systems point of view… as anyone who’s reached navabi’s stage will probably be familiar with, they already had lawyers they trusted very much, accountants they trust a lot, and all was in good shape from a numbers and systems point of view: A member of the team – Dan Barker (a familiar face at EcommerceGuide.com) – had acted as a consultant for the business since 2013, then board advisor, then both CMO and essentially CTO at the same time to help bring the business back to profitability. The team had simplified the systems over the last couple of years so everything was in a good shape, and so that anyone needing to do due diligence basically had everything all ready.
In terms of the agreement: The companies came up with a rough framework for valuation. A big part of it for the buyer was the success navabi had achieved as a team through the pandemic. When I last spoke to the team, they had brought the business back from the brink of very high risk: the business was a little rocky a year ago at the peak of the pandemic – literally at a point where you would say it was uninvestable. The team genuinely turned this around, and CCX obviously noticed that and wanted to acquire from that point of view.
6. On the future for the brand:
The founders have worked on the brand for more than a decade. Its market has grown, but is still fragmented. They believe the future of brands like these will be in consolidation, and that joining part of a global group focused on a similar customer, in different regions, is the best way forward. The buyers believe the team has created a special brand, with great loyalty, and that it will be a great asset both to their product, and to the customers who trust and buy through it.
One of navabi’s aspects that was of particular interest was that the portfolio of websites was set up as – from a customer’s point of view – a marketplace of brands. That allows a smooth transition to add new brands, and to expand its range further.
7. On the future for the team:
Bahman says they will help with the transition of the brand, and that their key priority over this period is to ensure that navabi’s future is a success, and that the work they’ve put in over the years, and that the team they’ve worked with has put in, continues well into the future.
Thanks to Bahman and Zahir, and to Dan Barker for the details which we hope will help other ecommerce companies approaching a little-talked about phase of the ecommerce business lifecycle. We’re looking forward to seeing how they continue their entrepreneurial journey, building on their success of building the leading plus size fashion business in Europe.