Wasoko Merger Fallout: Employees Allege Startup Concealed Deal for Six Months

The decision by Wasoko, a Kenyan e-commerce platform, to withhold its merger plans with Egypt's MaxAB from employees for over six months highlights the delicate nature of such transactions and the potential impact of leaks on deal negotiations. According to two former employees speaking to TechCabal, the company kept the merger confidential to prevent any leaks that could jeopardize the transaction. This secrecy underscores the importance of confidentiality in sensitive business dealings, especially in the competitive e-commerce sector.

Founded in 2013, Wasoko has raised significant funding, totaling over $140 million from prominent investors like 4DX Ventures and Avenir Growth Capital. Despite its success, the company opted to keep its merger discussions with MaxAB under wraps until December 2023, when employees were informed about the impending deal during a video call attended by MaxAB executives.

The merger between Wasoko and MaxAB, a B2B e-commerce platform based in Egypt, is expected to be finalized by the end of March 2024. This strategic move reflects the growing trend of consolidation within the e-commerce industry as companies seek to expand their market presence and capabilities through partnerships and mergers.

The unexpected layoffs at Wasoko, which followed the revelation of the merger with MaxAB, have sparked controversy and legal action from affected employees. Despite some employees anticipating the merger and potential job cuts, the extent of the layoffs and the lack of preparation caught many by surprise. Over 100 employees across various departments in Kenya and India were let go on January 15, leading to accusations of unfair treatment and inadequate severance.

Nine former employees have taken legal action against Wasoko, alleging that they were unfairly dismissed and that the company's severance package was insufficient. They argue that Wasoko did not provide them with enough time to prepare for their termination and that the severance package favored long-serving employees, potentially violating local labor laws. The compensation package reportedly considered factors such as length of service, accrued leave days, and the number of days remaining until the termination date, disadvantaging those who had worked for the company for shorter durations.

The lawsuit highlights the complexities and challenges associated with workforce restructuring, particularly in the context of mergers and acquisitions. It underscores the importance of adhering to labor regulations and providing equitable treatment to all employees affected by organizational changes.

The court's decision to block Wasoko from terminating the nine employees has added another layer of complexity to the situation, indicating potential legal hurdles for the company as it navigates the aftermath of the layoffs. This development underscores the importance of adherence to labor laws and fair treatment of employees during workforce restructuring processes.

Furthermore, the revelation that some employees had taken bank loans under the assumption of job security highlights the financial impact of the layoffs on affected individuals. Wasoko's commitment to engaging with its banking partner, Standard Chartered, to discuss loan repayment arrangements and providing health insurance coverage until March 2024 demonstrates an effort to mitigate the adverse effects on employees.

In response to the situation, Wasoko reiterated its adherence to legal requirements regarding the notification of redundancies and the provision of severance packages. However, the discontent among former employees and the legal action taken against the company suggest ongoing challenges in addressing the fallout from the layoffs and ensuring employee welfare amidst organizational changes.

The decision of Wasoko to refrain from commenting on specific claims due to the ongoing legal proceedings reflects a standard practice to avoid potentially influencing the outcome of the case. This approach maintains the integrity of the legal process and ensures fairness to all parties involved.

The preparation of an exit document by Wasoko, reportedly barring employees from pursuing legal action against the company upon receiving their exit packages, raises questions about the terms and conditions of the severance agreements. Such clauses are not uncommon in employment termination settlements and are often intended to protect the company from future litigation.

The upcoming court hearing on February 13th will likely shed more light on the legal complexities surrounding the layoffs at Wasoko and the grievances raised by the affected employees. It remains to be seen how the court will adjudicate the matter and whether any resolutions or settlements will be reached between the parties involved.