• Saturday, December 09, 2023
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Risevest’s silence over Chaka buyout fee raises questions


Risevest’s non-disclosure of the amount it paid for the acquisition of Chaka has raised questions over what is becoming a trend in the Nigerian tech space.

Mergers and acquisitions (M&A) is often seen as one of the indicators that a market is maturing, and the Nigerian tech ecosystem is seeing a fair share of M&A activities. However, most of these transactions have their details shrouded in secrecy, raising concerns about transparency in the ecosystem.

On Tuesday, Risevest, a wealth management services provider, announced that it has acquired Chaka, which provides similar services. The deal, which was “undisclosed”, is described as a full acquisition. While officials at Chaka declined to comment on the deal, Risevest has gone to town calling the deal a game changer for the wealth tech segment.

“We will double down our efforts to give you a better experience and increase your access to the investment resources you need,” Risevest said in a statement to investors. “By leveraging our resources as a combined entity, you can look forward to more educational tools, investment recommendations, and support to help you grow your money, and make more confident financial decisions.”

Afridigest, a tech intelligence platform founded by Emeka Ajene, had in September released a list of mergers and acquisitions in Africa collected over the last 18 months. Of the total 41 deals, only four had numbers. Three out of the four involved South African startups and only one was from Nigeria.

According to Jason Njoku, founder of Iroko TV, exits are critical to the future of the tech ecosystem in Africa.

“The lack of exits would have a massive impact on this ecosystem. Four years ago when I started asking where are the $100 million exits, a lot of people thought I was just an old guy,” he said. “But why are you building a company if you are not thinking of exits?”

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Apart from the Risevest acquisition, there have been a few acquisitions announced in the ecosystem this year. Moniepoint, in September, got approval to complete its acquisition of Kopo Kopo, a Kenya loan-focused fintech company founded in 2011. While Moniepoint confirmed the acquisition, it did not disclose the fee it paid.

Turaco, a Kenyan tech-enabled insurance company, also announced the acquisition of microinsurance company MicroEnsure Ghana. While Turaco said the acquisition was part of a long-term vision to provide simple and accessible insurance to one billion people, the financial details of the acquisition were not disclosed.

It was the same story with Asaak, a Ugandan fintech company, which acquired FlexClub Mexico in August, giving it access to markets across two continents. Grinta, a Cairo-based B2B pharmaceutical marketplace provider, also acquired its counterpart Auto-Cure for an undisclosed value. Grinta also acquired PH Store, which also operates along the same vertical.

There were about 14 M&A deals between January and June and only three of them were disclosed. The disclosed deals include Fairmoney acquiring Crowdforce for $20 million. According to Afridigest, the deal was a mixture of stock and undisclosed cash. The other deals were by companies that may not necessarily pass as startups.

“As far as I am concerned, in 41 deals reported by Afridigest, we have no numbers. Not exactly inspiring to the next generation of founders. This is not just an African problem but it is particularly pertinent because there are not many wildly successful counterexamples. In over a decade, I have only seen one deal, Stripe acquiring Paystack, celebrated with fanfare,” said Ngozi Dozie, co-founder of Carbon, a digital banking platform.

Dozie, however, is also guilty of not disclosing a funding raise. In 2019, Carbon acquired Amplify Pay, which smoothened its path to becoming a digital bank. The deal was undisclosed.

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Njoku, who also advocates deal transparency, sold his Nollywood studio ROK to Canal+, a French television company, in 2019; the fee was also not disclosed.

Henry Azubuike Ojuor, founder in residence, Startupbootcamp, said the ecosystem is still lagging in terms of number of funding deals, hence, the few exits that are happening only help to show potential investors that there are opportunities in the African tech landscape. Deal transparency is the way to attract investors who are still on the fence about Africa to invest, he added.

“A lot of people are skeptical about the African ecosystem. For them, countries like Nigeria for example have a terrible reputation. So if you are able to talk more about the amount of money that’s being raised, and I am an investor from another part of the world seeing that this foreign investor has led this amount, that is an extra boost,” Ojuor said.

Some experts say not disclosing the investment is partly to avoid becoming a target for rent-seeking regulators. Tax regulators, for instance, can seize the opportunity to come after the parties involved in the deal.

“I think the decision to reveal numbers is made between the buyer and seller so sometimes its the person buying who wants to keep numbers under wraps,” said an expert who declined to be identified.

The expert however agrees there is gain by revealing how much was sold as bragging rights for the next deal but covering it can also signal ability to have discretion, which is a big deal for many big players.