Shopify's 6 River Systems Acquisition was a Smart Move

Shopify acquires 6 River Systems (Photo: justplay1412 / Shutterstock.com)

The champions of multi-channel e-Commerce platforms are expanding their presence. Shopify, Inc. announced in September 2019 that they have agreed to acquire 6 River Systems, a leading provider of collaborative warehouse fulfillment solutions. The move was intended to enhance their recently announced Shopify Fulfillment network, which was launched in June of this year. That service is intended to ensure timely deliveries, reduce shipping costs, and provide superior customer service for merchants and their customers, alike. 

And as of October 17th of this year, this major acquisition was completed. Now, just over a month later, things appear to be running along quite smoothly for the e-commerce giant's new business. And here's the kicker... this development has completed right before both Cyber Monday and Black Friday. This leaves Amazon with enough time to begin switching all the primary focus back to working through the high-volume of holiday orders.

Additionally, this acquisition is a critical step to accelerate the growth for both businesses as 6 River Systems will continue as usual to build and sell their solutions for warehouses. Through this acquisition, Shopify will add a team with decades of experience in the field of fulfillment robotics and software platforms. This includes leaders from Amazon Robotics (formally known as Kiva Systems). 

The merger also paves the way to increase the reliability and speed of warehouse operations, through the use of collaborative mobile robots (affectionally known as “Chuck”) that assist in inventory replenishment, picking, sorting, and packing. 

According to a globally distributed press release; “Shopify is taking on fulfillment the same way we’ve approached other commerce challenges, by bringing together the best technology to help everyone compete,” said Tobi Lütke, CEO of Shopify. “With 6 River Systems, we will bring technology and operational efficiencies to companies of all sizes around the world.”

Jerome Dubois, the co-CEO and co-founder of 6 River Systems adds, “By joining Shopify, we're changing the game of fulfillment. Together, we will help thousands of businesses improve their fulfillment operations, with an easy-to-learn solution that can more than double productivity and improve accuracy.”

What are the Financial Terms of this Acquisition?

The agreement was reached in September 2019, with negotiations having been in discussion for quite some time. The acquisition was approved by 6 River Systems’ stockholders and involved Shopify acquiring all outstanding securities valued at $450 million USD. The allocation of funds broke down to approximately 60 percent cash and 40 percent Shopify Class A Subordinate Voting Shares. An additional $69 million in Shopify Class A shares and options are allocated to the company’s founders and employees, which is essentially a stock-based compensation package. 

One item of potential concern to investors was the impact this transaction might have had on Shopify’s revenue. According to analysts, this transaction is expected to increase Shopify’s 2019 expenses by approximately $25 million, including $10 million in operating expenses; $8 million in amortization of intangibles resulting from purchase accounting; and $7 million in stock-based compensation. 

The addition of 6 River Systems is expected to generate annual billings of approximately $30 million in 2020, with associated revenue recognized over the multi-year lifetime of each contract.

Facts About Shopify

For several years, Shopify has become the leading multi-channel commerce platform. Merchants from home-based businesses to corporate e-Commerce providers have used Shopify to design, set up, and manage their stores across multiple sales channels, including mobile, web, social media, marketplaces, brick-and-mortar locations, and pop-up shops.  The platform also provides merchants with a powerful back-office and a single view of their business, from payments to shipping. The Shopify platform was engineered for reliability and scale, making enterprise-level technology available to businesses of all sizes. 

The Ottawa, Canada based company powers more than 800,000 business e-Commerce sites, operated in 175 countries and is the trusted source of e-Commerce solutions of Allbirds, Unilever, Kylie Cosmetics, and more. 

Facts About 6 River Systems

6 River Systems was founded in Waltham, Mass. in 2015 by Jerome Dubois, Rylan Hamilton and Chris Cacioppo. Dubois and Hamilton were previously executives at Kiva Systems (now Amazon Robotics). The 6 River Systems solution is operating in more than 20 facilities in the U.S., Canada and Europe, fulfilling millions of units each week for companies including Lockheed Martin, CSAT Solutions, ACT Fulfillment, DHL, XPO Logistics, and Office Depot.