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Wasoko and MaxAB Finally Complete Africa’s Largest Tech Merger

August 27, 2024

It’s taken eight months, but Wasoko and MaxAB finally complete Africa’s largest tech merger.

Both companies signed preliminary terms in Q4 2023 ahead of what has been referred to as Africa’s largest tech merger till date. The newly formed entity — which hasn’t been renamed — will be co-led by Daniel Yu, CEO of Wasoko, and Belal El-Megharbel, CEO of MaxAB.

“Through our integrated technology stack, our expanded Pan-African reach uniquely positions us to offer the best products and services from across Africa at maximum accessibility and affordability, supercharging our growth beyond what either company could achieve independently,” Yu said in a statement.

The newly formed entity boasts 450,000 merchants serving 65 million customers and over 4,000 full-time employees.

Initial reports suggested that the merger would be completed in Q1 2024, but Yu was quick to dismiss those expectations, citing the complexities involved in a merger of this magnitude. Both companies had raised over $200 million before the merger.

While the legal aspects of the deal were understandably complex, the operational and technological integrations went smoothly, with both companies integrating their tech stack in 60 days.

What is expected from the both startups

According to Yu, merging both companies would provide them with stronger operational capabilities and was a no-brainer considering both companies had a similar business model and organisational goals.

“The first thing we did was sit down and evaluate our ultimate objective, which was to build a world-class pan-African company that’s unlocking the full potential of the mass market. And what we realised in that process is that building out a pan-African is significantly harder than it looks.”

Shortly after raising a Series B round in 2022, Wasoko announced that it would be expanding into Senegal and Cote d’Ivoire, but that was short-lived.

“We saw the same opportunity on the ground in terms of a very fragmented informal retail space, but we underestimated the challenges when it came to running those localised operations, and especially building out the supplier networks and getting all of those commercial agreements in place,” Yu shares.

That experience revealed the need for local expertise, and with MaxAB’s primary market, Egypt, facing adverse economic conditions, both companies saw an opportunity to combine strengths.

How the new formed entity will be run

Yu and El-Megharbel were already familiar with each other, having raised capital from the same investor in 2018 and easily bought the idea of a merger.

El-Megharbel will oversee day-to-day operations for the company, while Yu will head corporate relations.

Having built their foundations on serving the B2B eCommerce market, the companies will now turn their eyes to financial services.

It has already begun offering inventory financing for merchants, while an e-wallet allows them to make payments on any platform. Furthermore, the digital services top-ups enable merchants to sell airtime top-ups and utility payments to customers, creating an additional revenue stream for both parties.

In the last year, over $20 million worth of financing has been extended to merchants with a 99% repayment rate. In Egypt, digital top-ups are already eclipsing eCommerce sales revenues.

B2B eCommerce companies have been in the eye of the storm over the last two years as funding to the continent declines. However, Yu argues that any assessment of the industry must be done in light of its unique operating systems.

While pure software startups can afford to focus on digital marketing efforts, B2B eCommerce companies must combine both offline and online marketing efforts to reach their target audience, who are more likely offline than online.

In addition, the need for a large workforce also means that layoffs or shutdowns can seem more impactful.

He adds that the advantages enjoyed by both companies stem from being early to the market. The company isn’t just stopping at financing but aims to leverage the retailer networks in the countries where it operates to unlock new revenue streams.

Previously, both companies offered private label products, but with the merger, will explore intra-African trade that leverages the merchant networks.