Wasoko is pushing for a key merger with MaxAB despite tensions

Wasoko, Kenya’s leading B2B e-commerce platform, has denied recent reports that its would-be landmark merger with Egyptian counterpart MaxAB has stalled, while allaying concerns over continued delays in the much-awaited deal.

In an email to WT, Wasoko said the deal was “progressing as expected and in accordance with the original terms,” ​​attributing the current process to the standard complexity of large mergers.

The response follows industry whispers suggesting potential obstacles to a deal that was initially hailed as a huge moment for African technology. In its December 2023 announcement, the merged entity was expected to serve more than 450,000 sellers in eight African countries, boasting a combined customer base that exceeds that of any previous African B2B e-commerce player.

While Wasoko maintains a positive outlook, the fate of this merger is of paramount importance to the African B2B e-commerce landscape, a sector currently experiencing a period of turmoil.

Market Disruptors in the Face of Disruption

Before the recent slowdown, African B2B e-commerce was extremely promising. Millions of informal retailers across the continent struggle with inefficient supply chains and limited access to credit. B2B e-commerce platforms such as Wasoko and MaxAB have emerged as potential solutions, connecting retailers directly with manufacturers and offering financing options.

Both Wasoko and MaxAB are among the established players in the African B2B e-commerce space. Founded in 2016, Wasoko secured a large $125 million B round led by Tiger Global in 2022, reflecting investor confidence in the sector’s potential. MaxAB, founded in 2018, has also seen a strong growth trajectory.

However, the past year proved to be a challenge for the B2B e-commerce sector in Africa. Fierce competition and a global venture capital drought have led to upheaval and closures. Wasoko and MaxAB were not spared, facing funding setbacks and making sharp cuts as the need to cut costs and reduce fuel burn rates became a common theme.

Tesh Mbaabu, who led the now-shuttered Kenyan B2B e-commerce startup MarketForce, described struggling with a “lack of differentiation and perfect competition” where aggressive price wars were eroding margins and making profitability elusive for many players.

However, consolidation is coming to the rescue for B2B e-commerce startups in Africa in response to the turbulent situation in the sector last year.

What comes to mind is TradeDepot’s acquisition of Ghana-based Green Lion in 2022, after TradeDepot raised $110 million in funding in a round last year. Like Chari, a Moroccan B2B e-commerce and fintech startup that acquired 100% of Diago, an Ivory Coast app that connects local stores with FMCG manufacturers and importers, in a deal announced in June 2022 that in unusually, it became Chari’s third acquisition in less than a year.

Is it a leader in African B2B e-commerce?

The initial announcement of the Wasoko-MaxAB merger positioned it as a response to these very challenges. The combined entity was projected to have a gross merchandise value of $50 million, but also anticipated significant restructuring; since then, there have been mass layoffs.

However, the prolonged merger process provided signals of a bottleneck, which: TechCrunch a report related to the impact of macroeconomic issues on transaction terms, as well as the impact of restructuring efforts on due diligence elements.

Wasoko’s email response, while emphasizing the progress of the transaction and adherence to the original terms, does not, however, provide insight into the details of ongoing negotiations. The company also declined to comment on specific financial details or the potential impact of the restructuring on initial customer base projections.

“For legal reasons, we are unable to disclose specific financial or other information about the terms of the merger at this time,” reads a statement to WT. “We look forward to sharing the exciting news once the transaction is finalized.

The coming months will be crucial for the Wasoko-MaxAB merger. If completed, the project could pave the way for a more consolidated and potentially profitable B2B e-commerce landscape in Africa. However, if the deal falls through, it could mean a wider fight for the sector, raising concerns about the durability of the initial buzz around these disruptive start-ups.

“For Wasoko, our newly focused strategic efforts in recent months have delivered positive results in the four markets we currently operate in, pre-merger,” the startup maintains, “and we are enthusiastic about the long-term benefits this will bring to the broader e-commerce industry. “