Introduction: Same Sector, Same Size – Very Different Outcomes

Rachel Turner had built her online homeware business in Manchester over seven years into a £4.8 million revenue operation with 22% year‑on‑year growth. Her customer base was loyal, her brand was well regarded, and her margins were solid.

When her M&A adviser presented two recent comparable deals in October 2025, she was puzzled. One pure‑play e‑commerce business in her sector had sold for 6.2x EBITDA. Another - on paper remarkably similar in size and profitability - had achieved 11.8x EBITDA.

The difference was not in the P&L. It was in the infrastructure.

The higher‑multiple business had:

• Three physical showrooms in key UK cities
• An AI‑powered customer data platform predicting purchasing patterns with high accuracy
• A hybrid fulfilment model serving both online orders and walk‑in customers from the same inventory

The lower‑multiple business was a classic direct‑to‑consumer model: website, warehouse, third‑party logistics. Profitable, but structurally exposed.

In 2025’s UK e‑commerce M&A market, profitability alone rarely commands a premium valuation. Buyers are paying up for strategic infrastructure - omnichannel capability, AI‑enabled operations, embedded finance, and defensible customer economics.

For owners planning an exit in the next 12–36 months, the central question is now blunt: are you running a website, or are you building infrastructure?

The Great E‑commerce Divergence in the UK

The UK e‑commerce M&A market has remained active despite broader economic uncertainty. Through October 2025, transaction volumes in digital commerce and related technology increased by an estimated 16–17% year‑on‑year.

Beneath this headline, the market is splitting into two valuation bands:

• Premium band: businesses achieving around 10x EBITDA or more, almost double the typical UK SME cross‑sector average of roughly 5–6x
• Standard band: online‑only retailers often trading in the 5–7x EBITDA range, with some struggling to reach that when growth has flattened or unit economics are under pressure

The businesses in the premium band typically share four characteristics:

1. Omnichannel footprint – physical touchpoints, retail partnerships, or hybrid fulfilment models
2. Technology and data infrastructure – AI‑enabled decision‑making, robust first‑party data, and automation
3. Embedded finance or digital payments capabilities – or integration points that make this straightforward for a buyer
4. Defensible customer economics – diversified acquisition channels and strong repeat revenue

By contrast, many pure‑play operators are wrestling with:

• Rising customer acquisition costs (particularly on Meta and Google platforms)
• Slower overall online sales growth as the UK market matures
• Margin pressure from returns, logistics costs, and discount‑driven competition
• Limited resilience when algorithms, ad pricing, or consumer behaviour shift

This is not a story of online versus offline. It is a story of single‑channel exposure versus multi‑channel resilience.

Lessons from Recent UK Deals: What Buyers Are Really Buying

Recent UK transactions across digital commerce, loyalty, AI and embedded finance point to a clear pattern. Buyers are less interested in acquiring “another website with customers” and far more interested in acquiring capabilities they can scale across broader portfolios.

1. Omnichannel and loyalty infrastructure

The acquisition of Lux Rewards, a UK‑based loyalty technology business, by global rewards group Enigmatic Smile in 2025 illustrates this shift. Lux Rewards was not simply an e‑commerce brand; it provided infrastructure that:

• Enhanced customer engagement across multiple retail channels
• Collected and structured valuable customer and transaction data
• Integrated into other platforms, including employee benefit software

In valuation terms, this is very different to buying an online retailer with a mailing list. Lux Rewards had created distribution and data infrastructure that could be used by multiple partners - precisely the kind of asset that commands strategic interest and higher multiples.

2. AI capability as infrastructure, not a buzzword

In 2025, almost every buyer deck includes a slide on AI. But buyers are not paying premiums for PowerPoint slides - they are paying for proven, deployable capability.

Examples from the broader UK technology and services market are instructive:

• Softcat’s first acquisition, Leeds‑based consultancy Oakland, was driven by Oakland’s specialism in data, automation and AI rather than its scale alone.
• UiPath’s purchase of Manchester‑based Peak.ai was largely a capability acquisition: AI to improve decision‑making and efficiency across larger enterprises.
• High‑profile deals such as Meta’s acquisition of UK‑based wearable AI startup Limitless and Salesforce’s purchase of London‑based AI agent firm Convergence further underline the appetite for infrastructure‑ready AI.

For e‑commerce and digital retail owners, the lesson is clear:

If you have implemented AI‑driven tools that improve margins, inventory turns, or conversion - and can evidence this - you are selling more than revenue. You are selling capability.

3. Embedded finance and payments as strategic levers

Digital payment and embedded finance infrastructure has become a core part of the omnichannel toolkit. Two recent UK deals highlight this:

• Lloyds Banking Group’s acquisition of digital wallet provider Curve signals the strategic importance of owning customer payment journeys and data, even though the transaction value sits beyond the SME range.
• Allica Bank’s acquisition of embedded finance specialist Kriya, with revenue around £12.6 million in 2024, demonstrates how SME‑scale fintechs with strong embedded distribution can attract meaningful valuations.

For an e‑commerce or digital retail business, you do not need to become a bank. But if your platform:

• Facilitates recurring payments
• Offers financing options at checkout through partners
• Or plugs into embedded lending solutions for your own SME customer base

you are building financial infrastructure that makes you more attractive to both strategic buyers and financial sponsors.

Why Pure‑Play E‑commerce Is Under Pressure

The divergence in valuations is not an abstract financial phenomenon - it is rooted in day‑to‑day operating realities.

Margin compression and CAC inflation

Over the past few years, UK e‑commerce operators have seen:

• Increased ad costs on Meta, Google and other digital channels
• Tighter tracking and privacy rules, making targeting and attribution harder
• Greater competition from established retailers with large budgets and first‑party data

A pure‑play business relying on paid social and paid search for 60%+ of its revenue is fundamentally exposed. If your customer acquisition cost (CAC) rises by 20–30% and your average order value does not follow, your EBITDA margin compresses rapidly.

Market maturity and cooling growth

UK online retail sales grew strongly through the pandemic, but growth rates have been normalising. As the gap between online growth and total retail growth narrows, buyers increasingly treat e‑commerce as a mature market. In mature markets, investors reward:

• Operational efficiency
• Defensible customer bases
• Differentiated technology
• Brand plus infrastructure, not brand alone

The experience of plant‑based meal brands and other subscription models in 2024–2025 has underlined this. Strong brands without robust unit economics or diversified channels have struggled to sustain previous valuations when acquisition costs and churn rates became harder to manage.

What Actually Commands Premium Multiples in 2025

When UK private equity firms and strategic buyers analyse an e‑commerce or digital retail business today, the checklist has moved on. The core financials still matter, but they are no longer enough on their own.

Below are the factors we see regularly supporting 10x‑plus EBITDA valuations in the current market.

1. Omnichannel capability and physical touchpoints

Buyers are paying for optionality: the ability to sell to customers wherever and however they choose to shop. Evidence of this includes:

• Even modest showroom footprints in key UK locations
• Pop‑up stores in partnership with complementary brands
• Concessions within established retailers
• Click‑and‑collect or return‑in‑store arrangements
• B2B or wholesale relationships with data‑sharing agreements

You do not need a nationwide store network. What matters is a credible proof of concept that customers engage with your brand across channels, and that your operations can support that model.

2. AI‑enabled efficiency and personalisation

Practical AI applications that impress buyers include:

• Predictive inventory – reducing stockouts and overstocks, improving cash conversion
• Dynamic pricing or promotion engines – protecting margin while maintaining conversion
• Personalised product recommendations – raising average order value and repeat purchase rates
• Automated customer service – supporting human teams with AI tools to reduce response times and costs

For valuation purposes, the critical point is not the technology itself, but the evidence:

• What did you implement?
• What changed in your KPIs as a result?
• How does this scale in a buyer’s hands?

3. Robust data infrastructure

Buyers are increasingly sensitive to the distinction between:

• Data that lives inside platforms such as Shopify, Amazon, or Meta, and
• Structured, portable first‑party data that transfers with the business

Businesses that command higher multiples are typically able to show:

• A clean, well‑structured customer data set in a CRM or data warehouse
• Clear cohort analyses and retention curves
• Documented customer journeys and conversion funnels
• Evidence of how data informs decisions (buying, merchandising, promotions, product launches)

In valuation discussions, this allows you to move the narrative from “we have customers” to “we have a data asset that underpins better decisions”.

4. Embedded finance and payment options

Even at SME scale, integrating finance and payment tools can materially strengthen your story:

• Offering instalment options or trade credit via third‑party providers
• Providing a seamless digital wallet or rewards mechanism
• Integrating with embedded finance providers that can scale with a buyer

Buyers value the ability to improve customer lifetime value and order frequency through these levers, without having to build them from scratch.

5. Defensible unit economics

Sophisticated buyers now look beyond headline CAC and LTV figures. They will ask:

• What proportion of revenue is driven by organic and direct traffic?
• What is your email‑driven revenue share?
• How does repeat purchase behaviour change over time?
• How exposed are you to a single platform or partner?

Premium‑valued businesses typically:

• Generate a high proportion of revenue from repeat customers
• Maintain strong email and loyalty engagement statistics
• Show resilience when ad costs fluctuate or algorithms change
• Have at least two or three meaningful acquisition channels that are not solely pay‑per‑click

A 12–24 Month Repositioning Plan for Pure‑Play Operators

If you are running a UK e‑commerce or digital retail business with £1–40 million revenue and an exit horizon of 12–36 months, the good news is that you can move up the valuation band -  but it will not happen by accident.

Below is a pragmatic repositioning timeline.

Months 1–6: Audit and infrastructure assessment

Start with an honest, data‑driven review of where you stand:

Channel and infrastructure audit

• Map all sales channels: website, marketplaces, wholesale, pop‑ups, retail partnerships
• Assess your fulfilment model: own warehouse, third‑party logistics, hybrid, click‑and‑collect
• Identify 2–3 realistic infrastructure upgrades that would change how a buyer models your business (for example, a small showroom or a strategic partnership).

Data and technology audit

• Assess where your data lives and how portable it is
• Identify gaps in your customer data (e.g. limited first‑party data, poor segmentation)
• Review your tech stack: commerce platform, CRM, analytics tools, marketing automation, loyalty, AI add‑ons

Customer economics review

• Analyse CAC by channel and segment
• Map your retention and repeat purchase profile
• Identify where your economics would be most at risk if a single channel under‑performed

Goal by month 6: a clear prioritised roadmap of infrastructure and channel investments that would most improve your exit story and valuation multiple.

Months 6–12: Quick‑win omnichannel and AI initiatives

You do not need to transform your entire model to demonstrate omnichannel intent. Focus on achievable, high‑signal moves:

Launch one or two physical or partnership touchpoints

• A small showroom in a key geography (even appointment‑only or pop‑up)
• A concession or trial range in a national or regional retailer
• A structured click‑and‑collect or return‑in‑person option with a partner

Pilot AI‑powered improvements

• Trial AI‑driven recommendation tools on your site and measure the uplift in average order value
• Use machine learning tools to improve inventory management, particularly for seasonal or fashion‑sensitive categories
• Experiment with AI‑assisted customer service for first‑line support, tracking impact on resolution times and satisfaction

Strengthen owned channels

• Develop a content strategy aimed at improving organic search and direct traffic
• Build or refine your email and SMS programmes, with clear welcome, win‑back and VIP flows
• Introduce or upgrade a loyalty scheme that encourages data capture and repeat behaviour

Goal by month 12: be able to evidence at least two tangible infrastructure or technology initiatives that have improved economics or resilience.

Months 12–24: Package and prove your infrastructure story

Once the foundations are in place, the focus shifts to translation -  turning improvements into valuation leverage.

Develop a clearly articulated synergy story
Work with your M&A adviser to model:

• How your AI‑enabled tools might perform across a buyer’s larger revenue base
• How your retail partnerships could be expanded (for example, from 5 stores to 50)
• How embedded finance or loyalty elements could be rolled out across a buyer’s portfolio

Build a data‑rich information pack
Prepare a data room that does not just cover accounts and contracts, but also:

• Technology stack documentation
• Customer and cohort analytics
• Evidence of omnichannel trials and performance
• Case studies of operational improvements (e.g. reduced stock write‑offs, improved fulfilment times)

Stress‑test your narrative with “buyer‑type lenses”

• How would a trade buyer in your sector view the synergies?
• How would a financial sponsor building a buy‑and‑build platform view your role as a “miniature infrastructure hub”?
• What would each type of buyer need to see to justify a 9–11x multiple instead of 5–7x?

Goal by month 24: have a coherent, evidenced story that positions your business as an infrastructure‑rich, omnichannel‑ready asset rather than a single‑channel online retailer.

Why Timing Matters in the Current UK Market

The next 12–24 months are likely to be pivotal for UK digital commerce exits. Several dynamics are converging:

• Buyers are actively repositioning portfolios towards infrastructure‑rich assets
• The cost of capital remains a constraint, making buyers more selective
• Larger strategic acquirers are filling capability gaps through M&A rather than building everything in‑house
• There remains a finite pool of high‑quality, omnichannel‑ready SME assets

For pure‑play operators, the risk is that waiting too long without making structural changes may push you further down the valuation spectrum as buyer expectations continue to rise.

For owners willing to invest carefully in infrastructure now, the opportunity is to position into the scarce premium tier while buyer appetite remains strong and the supply of well‑prepared omnichannel assets is limited.

A Practical Checklist: Are You Building a Website or an Infrastructure Platform?

Use the following questions as a high‑level readiness check:

Channels and footprint

• Do you have any physical presence or retail partnerships?
• Could a buyer see credible pathways to multichannel expansion?

Data and technology

• Do you own and control your key customer and transaction data?
• Can you present clear cohort and retention analyses?
• Is there at least one AI‑enabled capability demonstrably improving performance?

Customer economics

• What proportion of your revenue is repeat business?
• How dependent are you on any single paid channel?
• Have you quantified the difference in CAC and margin between paid and owned channels?

Payments and finance

• Are there natural opportunities for embedded finance (consumer or B2B) within your model?
• Have you explored partnerships that could introduce these options without adding regulatory complexity?

Exit positioning

• Can you describe in a paragraph why a trade buyer or private equity firm would pay a premium multiple for your business?
• Have you translated operational improvements into a compelling synergy story?

If your answers highlight significant gaps, you are not alone. Many strong UK e‑commerce businesses still sit in the “good business, average multiple” category. The owners who recognise this early - and act - will be best placed to achieve life‑changing exits when the time is right.

Rachel’s Decision: A Case Study in Repositioning

Returning to Rachel in Manchester: faced with the valuation gap, she chose not to accept the status quo. Instead, she committed approximately £180,000 over 16 months to:

• Open two compact showrooms in carefully chosen UK locations
• Implement an AI‑driven customer data platform to improve targeting and retention
• Develop a wholesale partnership with a national retailer to validate her brand beyond her own website

Her target exit date is Q3 2026, with an ambition to reach a 10x EBITDA multiple. While no responsible adviser can guarantee a specific outcome, based on current UK market dynamics and the direction of travel in digital retail M&A, this type of deliberate repositioning can materially shift valuation discussions.

The broader question is simple:

When you come to sell, will a buyer see you as a single‑channel online retailer, or as a resilient, infrastructure‑rich omnichannel platform?

About Exit Strategy & Solutions

Exit Strategy & Solutions is a specialist advisory firm helping UK SME business owners navigate the complexities of exit planning and execution. We work with founders and owner‑managers considering an exit in the next 12 to 36 months to:

• Maximise business value
• Identify the right strategic or financial buyers
• Structure transactions that protect both financial outcomes and legacy

Our experience spans UK e‑commerce, digital retail, technology‑enabled services and other high‑growth sectors. We combine sector knowledge with an understanding of what buyers are really looking for in today’s market.

Ready to Understand Where Your Business Sits in Today’s Market?

If you are a UK e‑commerce or digital retail owner and would like to understand how buyers might view your business today - and what you could do over the next 12–24 months to move into the premium valuation - we can help.

Contact us for a confidential discussion:

• Email: enquiry@exitstrategyandsolutions.com
• Phone: 0330 043 4689
• Web: www.exitstrategyandsolutions.com

Legal Disclaimer

Exit Strategy & Solutions provides unregulated, confidential advisory support to UK business owners. This article is for general information only and does not constitute financial, legal, tax or regulated investment advice. Business owners should seek appropriate professional advice before making decisions about business sales or exit planning. Market conditions and transaction details can change, and individual circumstances vary significantly.

Privacy:

Individual names and specific business details in illustrative examples have been adapted to protect client confidentiality, although market data and transaction values reflect real UK M&A activity where referenced.

Copyright © Exit Strategy & Solutions 2025. All rights reserved.