The Lesson from Teranga and HotelOnline Merger

This is exciting – two companies with similar business models merging. Typically, in Nigeria, we do struggle on that. Everyone wants to have the title of “CEO”, and at the end, there is no company that remains to have a meaningful one. From Aba to Lagos, Kano to Ife, Nigerian business owners must have a redesign where people understand that merging or coming together is not a sign of weakness. The merger of Senegalese Teranga and HotelOnline to create a stronger traveltech company should inspire us across Nigeria.

Senegalese Teranga Solutions has merged with HotelOnline to create a traveltech industry leader in the global frontier markets. The companies individually had systems and business models that were complimentary and together they now have a cloud-based ecosystem platform for independent hotels – the first of its kind, making HotelOnline a global leader in frontier markets.

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In a joint statement the four founders said “by joining forces we are able to provide a complete solution specifically designed for hotels in frontier markets. The global frontier markets comprise majority of the world’s hotels. But these hotels are yet to catch up with digitization of their operations and markets hence they are the low-hanging fruits.”

Eric Osiakwan, Managing Partner of Chanzo Capital who is an investor in Teranga Solutions and now joins the board of HotelOnline indicated that by coming together under HotelOnline we have the clout to conquer and dominate the hospitality industry in the global frontier markets for the foreseeable future. “I am proud to be part of this amazing global team combining Africa and European expertise and experience considering the tremendous growth opportunities of the merged company.”

Largely, when you do not have a lot of growth capital, the best path to hold your territory from local and foreign competitors may be combining resources. Through a merger, you improve unit economics and most importantly become bigger before clients and customers.

Sure, you do not just have to merge for the sake of merging. The message here is that merger is a very important element of business systems. Recall how some banks during the Central Bank of Nigeria capitalization phases, many years ago, went under because the owners simply refused to merge their banks with other banks. Yes, when a big man merges with another bank, he would be unable to use the phrase “my bank” because he does not control all aspects of the institution, they reason! Yes, the same person would praise the durability of generation-shaping banking institutions in U.S. and Europe. Unless we are ready to do what they do there – combine resources when necessary – we cannot make progress in our economies.

From government and trade association data, more than 79% of Nigerian companies collapse within three years of establishment. It is possible that with merger and (possible acquisition), we could salvage more value from those entities.

The best job right now is the job you have now. That is very important. Do not make the mistake of thinking that you can resign tomorrow and become Dangote. More than 79% of new businesses collapse in Nigeria within 3 years. So, the system is not that easy. You can open a business in Lagos and operate for two years without one kobo of revenue.

The Benefits of Mergers

Across markets, it has been clearly understood that mergers deliver great benefits to companies and economies when done appropriately and strategically.

• Economies of scale.

• Tax benefits.

• Financial resources.

• Entry in global markets.

• Growth and expansion.

• Helps to face competition.

• Increase in market share.

• Increases goodwill.

• Research and development (R&D).

• Miscellaneous advantages.

All Together

As you create value for your stakeholders in Nigeria, be watchful where merging with another entity could open up more opportunities. Teaming up with others, when done correctly, opens many new opportunities in markets. Titles do not build empires – capabilities do. Mergers do bring capabilities in markets.

Sure – men cannot talk at beer joints that they hold the titles of CEOs and Managing Directors post-partnerships in some cases. We like titles – a lot. But we need to understand that they are ephemeral. It is far better for three shoemakers to make progress when one is indeed a CEO, another is focusing on production while the other is driving sales/marketing. While the egos may be muted, the bank accounts will grow. And as the banks see the growing scale, those loans will begin to come in because they are seeing better digits hitting the bank accounts.

Another key thing to know is that merger could help you to avoid the destruction of value in your market. That is why I still believe that Uber and Lyft would merge one day as traditional car companies rattle them with avalanche of competition: “As they become peer-competitors and rivalries, they will destroy the sector. Similar rivalries have ended together: Elance/Odesk (now UpWork),  Groupon / LivingSocial,  Sirius / XM and  Rover / DogVacay. Please add DraftKings and FanDuel in the list”.

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I believe a lot of work needs to be done, in making the business owners understand the mathematical and economic meanings of this simple but complex word called – PERCENTAGE.

Actually, 100% percent is not always bigger than 5%, there are countless businesses whose 1% share is far bigger than the famed 100% ownership and control, which our small business owners are always in love with.

A mind shift is needed in our business space; with the refined and elevated mindset, we can better understand and appreciate the immeasurable benefits of coming together to achieve something big.

There are thought processes and ideas that are very difficult to place a price on, by joining forces, some of these valuable resources would naturally come the company, without needing to spend fortunes in search of great talents.

Mergers and acquisitions when properly done, would help to erase the ever-present stunted growth syndromes that are prevalent and palpable in our market space.

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