MFS Africa acquires Baxi in what the company describes as Nigeria second-largest fintech acquisition
MFS Africa acquires Baxi in what the company describes as Nigeria's "second-largest" fintech acquisition
MFS Africa has agreed to acquire Capricorn Digital, one of Nigeria's largest digital solutions and distribution companies, for an undisclosed sum. Capricorn Digital has a 90,000-strong agent network throughout the country and is one of the country's largest digital solutions and distribution companies.
Over 35 countries are connected through MFS Africa, the continent's largest fintech interoperability hub, which serves as a single integration point to connect banks, telecommunication companies, and money transfer operators. A total of 320 million mobile money customers are estimated to be using the hub, interacting across multiple digital wallets without incurring transaction fees. Paga, MTN mobile money, Ecobank, and Safaricom are among the operators that have integrated with the hub.
With the Baxi brand, Capricorn operates an ecosystem of digital payment services geared toward small and medium-sized enterprises (SMEs). Its solution is intended to assist Nigerians with their daily payment requirements, which include utility bill payments, airtime purchases, pay-TV and data subscriptions, cash withdrawals, and money transfers. They are provided by the company through its retail network of agents and merchants in some of Nigeria's most remote areas, in addition to through its BaxiBox Point of Sale, BaxiPay, Baxi MPoS Device, and BaxiRIMS products.
Because of the country's limited number of mobile wallets, MFS Africa's third all-cash acquisition in five years allows the company to expand into Africa's largest economy, where it has previously had a limited presence. Capricorn will be rebranded as MFS Africa, but the company's flagship product, Baxi, will remain the same as before.
Both parties declined to disclose the deal's total value, but Capricorn Founder and CEO Degbola Abudu stated in an interview with TechCabal that the transaction is the second largest of its kind in Nigeria's fintech space, trailing only Stripe's $200 million acquisition of Paystack last year.
MFS Africa was founded in 2009 by Dare Okoudjou, a Beninese national, while Capricorn was founded in 2014 by Abudu, a Nigerian national, and Folu Majekodunmi. A larger, more versatile company will be formed as a result of the acquisition, which will combine interoperability between money operators with a mass market super-agent network.
A pan-African procession is taking place
MFS Africa's grand vision, according to Okoudjou, is to have a presence in all 54 African countries, serving 500 million people and millions of small businesses in the process.
In his words to TechCabal, "if you have a phone or a point of sale, that should be sufficient to conduct business with other parts of Africa and the rest of the world." 'We're working on establishing the continent's premier real-time payment hub that will be currency-neutral and allow people to transfer money in the same way they communicate,' says the CEO.
A common strategy for MFS Africa's continental expansion strategy has been to partner with money operators and to make minority investments in other fintech companies across Africa, as has been the case with Julaya, Maviance, and Numida, among others.
Although Okoudjou explains that a full acquisition is chosen when both parties believe it is the most effective way to achieve their mutual long-term objectives, he adds that it is not always the case.
What would be your motivation for making an acquisition?
The acquisition talks between Capricorn and MFS Africa evolved from a minority investment to a full buyout, similar to the acquisition of Beyonic, a Ugandan fintech startup, by MFS Africa in June 2020 for an undisclosed sum.
In our conversations with Dee, it became clearer to us what we could accomplish as part of a full acquisition rather than as investors with potentially misaligned incentives.
Capricorn is of particular interest to MFS Africa because of the need to "increase our presence in Nigeria," according to Okoudjou, who points out that the country's unique market characteristics—such as the predominance of offline payment touchpoints over mobile-first transactions—make it a good fit for the company.
As he explains it, "in other markets, a single or two partnerships with mobile money operators could bring us to 60 percent of the country's digital payment users." "Mobile money, on the other hand, is not widely used in Nigeria. On the contrary, agent networks such as Capricorn's have accelerated their growth in recent years."
While MFS Africa can provide online services to SMEs through Beyonic, Baxi enables the company to connect with offline merchants in Nigeria and other parts of Africa as well.
A game of few players, says Abudu, will define the future of Africa's mobile payments landscape. Consolidation, he says, will be the way forward, as scaling alone would require additional capital and time to execute.
"partnering with a company with a true pan-African footprint at this point in time, and we anticipate synergies across our operations as a result of this partnership They provide a diverse range of value-added products and services, such as cross-border payments, and we have access to SMEs in Nigeria, one of Africa's largest markets, through our partnership with the African Development Bank "he explains. "Despite our best efforts, we believe that we have only scratched the surface of the market's potential. Numerous benefits accrue as a result of the transaction, which allow us to expand at a rapid pace."
As a result of the acquisition, MFS Africa will turn Baxi into an important component of its digital payment network, allowing customers to send and receive cross-border payments to and from Nigeria, similar to what it has done with mobile money operators across Africa. MFS Africa will also broaden the reach of Baxi's offline small and medium-sized enterprise (SME) proposition in a number of markets within its footprint.
According to Abudu, "We've grown into a sizable business on a shoestring budget, but now we want to compete not only in Nigeria, but throughout the entire African continent." "The agreement with MFS Africa enables us to expand Baxi and the model that has proven to be so successful in Nigeria to other African countries," says the company's founder.
It is the intention of MFS Africa to engage with Nigeria's central bank and other regulators in order to obtain any additional licenses that may be required to operate its full-service offerings in the country, which will include remittance, microlending, and insurance, as well as to explore commercial opportunities in the country.
