Behind the scenes of the POSRocket acquisition [Part 2]
In January 2022, Saudi Arabia-based fintech and foodtech startup Foodics announced it had acquired Jordan-based point of sale provider POSRocket. In the second part of this series, POSRocket founder Zeid Husban explains how the acquisition came about and the lessons he learned as a result.
In our business, Q4 is the hottest month of the year in terms of sales, so to try and close the acquisition in Q4 was a big challenge, we wanted our teams to be focused because you never know if the deal will go through or not, and you do not want to waste time to grow.
Our market is small, I started getting calls from friends in the ecosystem congratulating me on the acquisition before even signing the termsheet. I really did not want the team to hear the news from anyone else, so decided to do an all-hands meeting to let them know about the news. It was a very tricky situation, as typically, everyone worries about the “unknown” and I personally did not have all the answers because we were still in the process, but I told them anyway. I started the meeting by explaining how 90 per cent of startups fail and only 10 per cent make it, so we were privileged to be part of the 10 per cent and that was all due to their hard work and dedication. I wanted to keep everyone motivated.
We tried to anticipate the questions they would ask and so we had a slide full of Q&A ready, I also received mixed vibes from the team, some were very excited about the next phase and how we can grow with Foodics at a faster pace, some were very attached to the company and really did not like the idea. But we tried to keep everyone motivated and promised to keep them updated.
After we signed the termsheet, I asked Ahmad AlZaini, the co-founder and CEO of Foodics and his leadership team to visit our offices in Amman. We had an all-hands meeting where Ahmad and the team had the chance to speak to the POSRocket team, answer all their questions and tell them more about Foodics and its plans to expand, and motivate everyone. For me, this was essential because it is also important to get the buy-in of everyone to stay motivated and see their future with this new merger.
Both our teams knew that this would be a very hard task to complete since the majority of mergers fail due to post-merger issues. It is by its nature, very difficult. You are trying to make two different organs work together in the same body, each company has its own culture, way of execution etc, and neither teams had any experience in such a diligent process, but that is the beauty of startups, you figure things out.
Foodics at that time were in the middle of raising its Series C, so the management team were all occupied with talking to investors. I give them a lot of credit that they managed to raise the biggest round in the Middle East and North Africa for a SaaS company and also finalise the acquisition of its closest competitor. Foodics’ team did this while making sure they hit their growth targets for 2021. Wow.
We made sure to focus on three areas: people, partners and product and of course the most challenging part was the people. At that time POSRocket had around 120 employees and Foodics had around 230 employees. Foodics wanted to grow its workforce and had plans to hire, so could it get any better? With the merger, Foodics could fill those positions with people who actually understand the industry very well and can have a clear return on invest in a short period of time.
POSRocket had offices in Jordan, Egypt and Kuwait while Foodics had offices in Saudi, UAE and Egypt, so the common country that we were competing in was Egypt. We started by having Foodics identify which key positions it was hiring for and tried to match this with talent from POSRocket. Foodics had its own process in hiring and wanted to follow the same process by interviewing everyone at POSRocket and to ensure the right culture and technical fit. We followed the process and its team interviewed everyone in the course of one week, which was great.
Migrating the teams in Jordan and Kuwait was the easiest because Foodics had no presence in those countries, most of the senior managers were offered positions in the HQ in Riyadh. The most difficult was Egypt, both of us had offices and teams on the ground and there was fierce competition between the teams, so merging those two teams was not an easy task.
The summary: Foodics managed to offer 98 per cent of POSRocket employees positions in Foodics and everyone received at least a 20 per cent increase on their salaries and a bonus as a goodwill gesture to appreciate their hard work (which was a very nice them). But not everyone ended up with the position and title they were hoping for, which created a lot of friction for some people, as they felt they were downgraded. This was expected because there is no way you can offer the title and position they want since Foodics already had employees of their own in those positions. Everyone accepted the offers but the majority of people who were dissatisfied started looking for other options in the market and eventually left. A few months after completing the acquisition we lost almost 17 per cent of POSRocket employees as they found other opportunities, which is normal in any merger.
We decided to use Foodics’ product moving forward as it was more mature in certain areas, and try to make use of different modules in our system which we developed recently (this was easy) we then looked at how to migrate our customers to Foodics. At the time, we more than 3000 merchants, and migrating them was very challenging because we both had different processes in place and the devil is always in the details. The migration of customers was not smooth at the beginning for the following reasons:
- No owner for migration from Foodics’ side and all teams were motivated to close their existing targets (new acquisitions)
- No clear incentives for teams to finalise the migration
- Very different process, so trying to find out the best unified process took some time
- Writing migration scripts took some time and we also had different hardware components which needed to be integrated.
Please imagine all these challenges as well as closing the Series C round taking place at the same time. After a couple of months we managed to have a unified process and incentives in place and migration scripts were ready. We migrated the majority of POSRocket’s clients to Foodics and we put a target to finalise everything before the year-end to make sure all clients are on a single product and enjoying all the great product updates we are releasing.
Looking back, it was a rollercoaster for all of us trying to digest everything at the same time. Thankfully it was a successful migration, the POSRocket acquisition in my personal opinion had a great influence on the ecosystem, having a venture-backed startup from the region acquiring another venture-backed startup also from the region was a great first step, and it really helped us in raising $170 million instead of the $100 million initially planned. This was all down to the great effort and hard work on both the POSRocket and Foodics’ teams to make it successful.
The journey is not over yet, we still have a lot to learn, and I am very excited for what the future holds.
This article was originally published on Medium. It has been reproduced on Wamda with some minor edits. To read the first part, please click here