Two of Africa’s largest B2B e-commerce platforms, Wasoko and MaxAB, have officially completed their long-anticipated merger. This merger, conducted as an all-stock transaction, signifies a significant shift for both companies from being purely B2B e-commerce platforms to becoming a multi-vertical ecosystem that serves Africa’s vast $600 billion informal retail sector.
Discussions about this merger between Kenya-based Wasoko and Egypt-based MaxAB began in December of last year. According to Daniel Yu, co-CEO of the newly formed entity, the merger involved the integration of 16 subsidiaries across multiple countries—a complex process that understandably took about eight months. This timeline is considered typical for global mergers of this scale.
Before this merger, Wasoko and MaxAB had attracted significant investments from high-profile investors such as Tiger Global, Silver Lake, Avenir, and British International Investment, collectively raising over $240 million.
Wasoko and MaxAB have been key distributors for small mom-and-pop shops across Africa, offering some financial services alongside their core e-commerce operations. Initially, they operated in eight markets but have now scaled back to five: Egypt, Kenya, Morocco, Rwanda, and Tanzania. This move is consistent with a broader trend in Africa’s B2B e-commerce sector, where many companies have had to reduce operations, pivot, or shut down due to cash constraints and shifts in the funding environment.
Despite these challenges, the merger presents significant growth opportunities for the combined entity. Wasoko and MaxAB were already two of the largest B2B e-commerce companies in Africa, based on metrics like Gross Merchandise Value (GMV) and merchant base. The new entity claims to have the continent’s largest network of B2B informal retailers, with over 450,000 merchants, though only about 200,000 may be active across both platforms.
“In line with the shift in focus on what’s important or not, we’ll decline to state specific GMV; however, what I will emphasize is that we are now making a net contribution margin or net profit per order, which wasn’t the case in the back in the day in the GMV maximizing period,” Yu noted.
B2B e-commerce companies have long argued that serving mom-and-pop shops is a gateway to offering financial services, which can unlock additional revenue streams. Both Wasoko and MaxAB had already started offering services like e-payments, credit financing, and digital services top-ups. Under the new entity, these services will be managed by stand-alone business units and provided through a unified app alongside their core e-commerce offerings.
Egypt stands out as the largest market for the new entity’s fintech services, which have generated more sales than their e-commerce transactions, which totaled over $180 million last year. Additionally, the combined company has provided over $20 million in merchant financing in the past year, boasting a repayment rate of over 99%. They expect revenue from these fintech services to more than double by the end of 2024.
Daniel Yu discussed the implications of the merger, the new synergies that have emerged, and the future prospects for the combined entity.
When asked whether the merger was a merger of equals or if one company was more dominant, Yu confirmed that it was indeed a merger of equals. The commercial terms reflected this, with nearly a 50/50 split in cap tables and shareholder base.
Yu also addressed the issue of valuation in the merger, explaining that for private companies like Wasoko and MaxAB, there hasn’t been an independent valuation since their last round of funding in 2022. He noted that while investors might adjust the book value of their stakes, these changes don’t materially affect the day-to-day operations or value of the company.
Regarding future fundraising, Yu mentioned that while the company is not actively raising money right now, they are considering it for the future as they aim for long-term growth and profitability. He acknowledged that the focus on fintech is part of their strategy to diversify and become more attractive to investors, given the current challenges in the B2B e-commerce sector.
Yu also highlighted the value they’ve created by digitizing and onboarding over 200,000 mom-and-pop stores into their app and physical network, which allows them to offer services like free next-day delivery and cash pickup. He mentioned that in some markets, they are making deliveries on behalf of companies like Jumia and Amazon, leveraging their logistics network.
Looking ahead, the merged company plans to expand its fintech offerings across existing markets and continue to achieve profitability in its e-commerce operations. They also aim to explore new opportunities, such as cross-border procurement, which aligns with the growing interest in intra-African trade and exports.
Yu emphasized that the merger has allowed both companies to combine overhead costs, leading to significant savings and improved efficiency. While the benefits of the merger are already becoming evident, Yu acknowledged that it will take time for these gains to fully materialize.
In the broader context of the African tech ecosystem, Yu suggested that further consolidation among startups is likely, as companies look to achieve the scale and diversification needed to attract global investment. He noted that the combined entity is well-positioned to unlock the full potential of the African markets, particularly through hyper-local operations and partnerships like the merger with MaxAB.