Wasoko and MaxAB say merger will create a clear e-commerce leader with tens of millions of runway

A planned merger between MaxAB and Wasoko, the Tiger Global-backed Kenyan e-commerce startup, will make the new entity a clear leader in Africa, leaders of both firms told TechCabal. According to Daniel Yu, CEO of Wasoko and Belal El-Megharbel of MaxAB, the deal which is still in preliminary stages is expected to be finalised in the first quarter of next year.

The merger is already being touted as the largest private tech deal in Africa. Wasoko was last valued at $625 million after it raised $125 million last year. The firm says it has received $113 million out of that investment. El-Megharbel of MaxAB declined to disclose the valuation at which his firm raised $40 million in October 2022. Both executives declined to comment on their valuation expectations for the new company.

“This is not a new discussion; this is really about a friendship and partnership that has been ongoing for years, and for us, it’s about taking things to the next level,” Yu said, adding that the combined company will have more “runway with tens of millions of dollars on the balance sheet.”

The deal will be structured as an equity consideration, which means that existing shareholders simply get a share of the new company upon completion of the merger. It gives wiggle room for investors who backed both companies and potentially allows VC firms to preserve most of the valuation at which they purchased their stake in either of the firms. According to Daniel Yu of Wasoko, independent investors and board members on both sides are part of the talks. Wasoko and MaxAB have raised almost $245 million from venture capital investors.

“This is a super tough business to crack. It requires a specific type of talent and well-capitalised companies to be able to crack it,” MaxAB’s El-Megharbel told TechCabal. “Before 2001, over 10 companies were trying to do what Amazon was doing. After a crisis hits there usually emerges a clear winner,” he added. Bringing both firms together would help them maximise their chances to come out tops.

Between 2019 and 2022, venture capital investors poured money into entrepreneurs building tech companies that focused on bringing Africa’s informal wholesale market for consumer goods online. Dubbed ‘B2B e-commerce’ as opposed to the direct-to-consumer e-commerce model of Jumia and Souq.com (acquired by Amazon), B2B e-commerce was described as more suited for the African experience because its primary customers were street shops and small retailers in African cities and towns.
More recently, B2B e-commerce has struggled, and to startups in the space, including Wasoko have laid off hundreds of staff and paused expansion plans.

In social media chatter on X (formerly Twitter) and private conversations on WhatsApp and Telegram seen by TechCabal, investors and founders speculated that one or both firms were struggling, hence the merger.

El-Megharbel and Yu dismissed those concerns. “The market is used to these deals happening in these specific incidences, so this is they just haven’t seen another way of doing this,” El-Megharbel said, “We and Wasoko have approached this at a point when we did not have to do it because once you have to do it, the companies are struggling at that time. Daniel and I are mature and humble enough to figure out that if we wait longer than this, it would probably be uglier for both companies or at least for one of them. The sooner, the merrier for this deal to happen.”

“Shareholders on all sides are extremely excited about what is happening,” Wasoko’s Yu said. “This is a 1 plus 1 equals 3. This transaction will establish us as the clear B2B e-commerce leader in Africa.”