E-commerce company Etsy (ETSY 1.66%) is acquiring London-based Depop in a $1.6 billion deal. Etsy is a marketplace for buying and selling handcrafted products. But with this acquisition announcement on Wednesday morning, the company is broadening its horizons into the apparel resale market with Depop's platform. 

According the official press release from Etsy, Depop will remain a stand-alone platform and will keep its headquarters in London. 

A woman looks at a tablet device while standing in a closet full of shoes.

Image source: Getty Images.

Etsy is acquiring Depop at a pricey valuation. Depop generated revenue of $70 million in 2020, which was up more than 100% from 2019. But this means Etsy is acquiring Depop at a price-to-sales (P/S) ratio over 23. For perspective, Etsy stock trades at a P/S ratio of around 10. And Depop competitor Poshmark trades with a P/S ratio of around 12.

Buying at a pricey valuation implies that Etsy has high conviction in Depop's ability to grow. And indeed, Depop's market opportunity is large and growing fast. According to the company, the fashion resale market is expected to be worth $64 billion by 2024 in the U.S. alone, growing at a 39% annual rate between now and then. That's certainly a good thing for Depop. But there is a growing number of players in the space to compete with, including Poshmark, ThredUp, and The RealReal.

Etsy management will discuss more details of the transaction in a conference call scheduled for 8:30 a.m. EDT.