B2B e-commerce startups Wasoko and MaxAB, both based in Africa, announced a planned merger in December 2022. The goal was to create better economies of scale in the face of challenges brought on by the Covid-19 pandemic. However, the deal has been delayed due to extended due diligence, ongoing restructuring, and macroeconomic headwinds. The delay is significant because this merger has been described as the largest in African e-commerce. Both companies have raised hundreds of millions of dollars collectively from high-profile investors, making the outcome of this deal an important indicator of the state of the B2B e-commerce market in the region.
Initially, the B2B players were active in eight countries, but that number has been reduced to four: Kenya, Rwanda, Tanzania, and Egypt. There have also been layoffs as a result of downsizing. Furthermore, there is talk of a review of ownership stakes in the new entity. Wasoko was originally set to own 55% with MaxAB retaining 45%, but the devaluation of the Egyptian pound has led to a revision of these shares. MaxAB may agree to the revision as it urgently needs the merger to close due to its depleted runway.
Both companies claim to have received additional investment to reach profitability, but they are still in talks to raise follow-on funding after the merger. Attracting new investors could be challenging in the current funding climate for B2B e-commerce unless both companies adapt their operations and focus on improving gross margins and expanding services.
To cut costs, Wasoko and MaxAB have already laid off employees, parted ways with key executives, and halted operations in certain markets. These moves suggest that the new entity will serve fewer than the initially quoted 450,000 retailers. The CEOs of both companies will continue as full-time executives but in different roles. Wasoko’s CEO will focus on investor relations, HR, and fundraising, while MaxAB’s CEO will handle internal matters such as tech and operations.
Tiger Global, Silver Lake, Avenir, and British International Investment are some of the high-profile investors who have injected over $240 million into Wasoko and MaxAB. The merger is being overseen by 4DX Ventures, a pan-African investor. The valuation of the new entity remains uncertain, but one of Wasoko’s investors marked down its valuation to $260 million in Q4 2023. Overall, the completion of this merger will have significant implications for the B2B e-commerce market in Africa.
