Souq's Suitors: A Win-Win Scenario, Either Way It Goes As Dash Ventures Managing Director Omar J. Sati put it: "An exit is an exit. Whether Amazon or Emaar, both [are] equally significant, and both [are] vital to the ecosystem's development and sustainability."
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The last few days of March have been rather eventful for those of us following the MENA entrepreneurial ecosystem- it's been exciting, to say the least. We had only barely begun to cheer reports of Amazon's acquisition of Souq.com for more than US$650 million, when a plot twist came around in the form of Emaar Malls lodging an $800 million bid for the e-commerce website. At the time of writing this piece, Emaar Malls had confirmed that it had indeed made such an offer, while Amazon and Souq are yet to release a statement on any of these reports. As a result, it's hard to predict how this will play out- we just have to wait and watch for the next development in this story. I've previously stated that the region would probably have been better served if Souq's ownership remained in the Arab world, but then again, one shouldn't discount the importance its sale, even if it is to Amazon, would be for the MENA entrepreneurial ecosystem at large. As Dash Ventures Managing Director Omar J. Sati told me: "An exit is an exit. Whether Amazon or Emaar, both [are] equally significant, and both [are] vital to the ecosystem's development and sustainability."
Sati's right, of course- after all, the region has been waiting with bated breath for an exit for quite a while now; the last one that hit headlines here was Rocket Internet's $170 million buy-out of the Kuwait-based Talabat in 2015. The MENA investment community's cheer was perhaps best showcased in BECO Capital CEO Dany Farha's tweet (@danyfarha is his handle) when news of the Amazon-Souq deal first came out: "Amazon's acquisition of Souq is a great day for MENA tech stakeholders. To those who ask, "Where are the exits?' Here you go." When I reached out to Farha for his thoughts on the current scenario, he replied: "If a traditional operator like Emaar Malls were to purchase Souq, and give it complete autonomy over strategy through to operations, allowing the true tech DNA of the executive team in place to shine and flourish, and only act as a helping hand to increase supply of product, strengthen supply chain, reinforce the branding and marketing offline in stores across the region, and build out an omni-channel strategy for retailers across the region, whilst supporting it with funding and increasing its capital efficiency, then this would be a fantastic outcome. Amazon has many of these attributes, which also makes it an optimal buyer."
With that being the case, if there are indeed two options in front of Souq now, then Sati believes the choice should essentially be made based off what makes better sense for the venture's founders and investors. "Clearly, the higher bid from Emaar is better for them at first glance," he explains. "But the Amazon deal is still unclear. Will they keep management? Will there be sweeteners such as earn-outs? Don't forget, the biggest advantage Amazon has is the ability to offer share swaps and share incentives in Amazon. In summary, I think an Emaar deal would be a short-term win for the Souq team, but an Amazon deal would be a more valuable win in the long-term. In either case, it's a win."
Sati has, in his characteristic succinct way (I recommend following him on Twitter at @ojsati for more of his pithy insights), hit the nail on the head- no matter which way the deal goes, the Souq sale remains a win to be celebrated. It's a testament to the excellent work done by founder Ronaldo Mouchawar and his team, and the exit will definitely be something to inspire more entrepreneurs to build amazing companies in the MENA region. And that, by itself, is worthy of applause. Congratulations, Souq!