In a landmark move for African e-commerce, Wasoko and MaxAB have completed their highly anticipated merger, marking a pivotal moment for the continent’s business-to-business (B2B) landscape. The all-stock transaction, finalized after months of intricate negotiations and integration efforts, signifies a transformative shift from two prominent B2B e-commerce platforms into a unified powerhouse poised to reshape Africa’s $600 billion informal retail sector.
The Merger: A New Chapter
The merger between Kenya’s Wasoko and Egypt’s MaxAB was first announced in December 2023, setting the stage for what would become the largest B2B e-commerce consolidation in Africa to date. The integration of their 16 subsidiaries across multiple countries involved a meticulous eight-month process, reflecting the complexities inherent in such large-scale deals.
Daniel Yu, co-CEO of the newly formed entity, described the merger as a strategic evolution. “We are moving from being standalone B2B e-commerce platforms to creating a multi-vertical ecosystem that better serves Africa’s informal retail sector,” Yu said in a statement.
Investor Confidence and Financial Adjustments
The merger has been bolstered by significant backing from high-profile investors, including Tiger Global, Silver Lake, Avenir, and British International Investment, who collectively invested over $240 million in the two companies before the merger. Despite this strong support, both Wasoko and MaxAB have faced challenges in the current investment climate, with many B2B e-commerce companies scaling back or closing operations due to cash shortages and evolving funding landscapes.
The combined entity now boasts Africa’s largest network of B2B informal retailers, with over 450,000 merchants. While specific Gross Merchandise Value (GMV) figures have not been disclosed, Yu highlighted that the focus has shifted from GMV maximization to achieving net profitability per order.
A New Focus on Profitability and Fintech
Yu emphasized a shift towards profitability, reflecting a broader trend among startups. “We are now making a net contribution margin per order, which was not the case previously,” he noted. The new entity is also set to leverage its fintech offerings, which are expected to provide higher margins compared to their traditional e-commerce operations.
Both Wasoko and MaxAB had previously offered financial services such as e-payments, credit financing, and digital service top-ups. These services will now be integrated into a unified app, providing a seamless experience for merchants. In Egypt, for instance, fintech services have already outpaced e-commerce transactions, with the combined entity projecting a more than doubling of revenue from these services by December 2024.
Operational Synergies and Future Outlook
The merger has led to significant operational changes, including centralizing back-office functions and streamlining costs. With nearly 4,000 employees, the focus is on maximizing efficiency and leveraging the combined network for new revenue streams. This includes expanding into cross-border procurement, such as sourcing tea directly from Kenya to Egypt.
Despite initial concerns about combining two loss-making businesses, Yu is optimistic about the merger’s impact. “By consolidating overhead costs and increasing operational efficiency, we are already seeing improvements in profitability,” he explained. The merged entity anticipates further benefits as new opportunities and synergies unfold.
Looking ahead, Yu believes the merger positions the combined company well within Africa’s evolving tech ecosystem. “To stand out in the current investment climate, you need scale and diversification. This merger is a strategic step towards achieving that,” he said.
As Wasoko and MaxAB navigate this new phase, their combined entity is set to redefine the landscape of B2B e-commerce in Africa, offering enhanced services and greater efficiencies to a vast network of informal retailers across the continent.