Behind the Scenes of the POSRocket Acquisition Pt.2

Thank you for taking the time for reading Part 1 and I am as excited as you are to share with you part 2.

Ahmad explained on the call they raised a $20m Series B round and they wanted to increase their TAM by getting into retail, he did mention us joining forces and for Foodics to focus on F&B and Rocket to focus on retail. Can I tell you a secret? I will be lying if this scenario never crossed my mind!! I was really amazed on how this thought is actually turning into reality. I told Ahmad thank you for your call and I am always happy to discuss win-win scenarios, but let’s arrange for a call to discuss this further. He then booked a virtual meeting 2 days after our first call.

I then of course informed our BOD but did not inform the team, I did not want to distract the team I wanted them to stay focused on the business as these topics can definitely be a distraction. I had the call with Ahmad and their CFO Abdullah Tahboub who was also present on the call, they clearly expressed their intention to acquire the company but they wanted to acquire 51% of the company and leave 49% to us and they tried to convince me that I would still have control😄 , honestly when I thought about it, we had more than 80% of our customers in the F&B industry and if we will be focusing on retail, and they own 51% it means only one thing “Incentives will NOT be aligned” I will work hard on increasing our 49% share and they will be working hard on increasing their 51%. and we had passion for F&B not retail so it will be VERY difficult to pull off.

Always have incentives aligned in any M&A deal, last thing you want is two companies working in different directions and strategies, this is when I told Ahmad & Abdullah that it is either a 100% acquisition or this whole thing will not work, they agreed instantly and then I learned they did start with 51% so they don’t intimidate me from the first meeting (Smart🙂 )

At the same time I was talking to Foodics, we were reached out by another company from Africa who wanted to expand into the Middle East and were interested in Egypt as a market, so they also now on the table of negotiation. Talking about being lucky? I truly believe something in life, if you always have clean intentions then good things come your way and God’s hidden hands will amaze you 🙏🏼

We now have 2 offers on the table for full acquisition, and I had 3 options to choose from

1- Foodics’ offer was majority share swap and minority cash.

2- The other company offered a 100% all cash deal but with 40% less valuation than Foodics’ offer

3- Continue the business as we had a runway of almost 6–8 months and raise another round of funding.

I decided to go with the first option for the following reasons:-

• Rocket & Foodics shared exactly the same vision, mission and purpose, we were doing exactly the same thing, we had a similar DNA
• I met with the wider executive team at Foodics and I felt there is chemistry with all of them (which is VERY important) because part of the deal was me working with this team, and they proved to be decent individuals during the process of the acquisition at multiple occasions which I have deep respect for them.
• I wanted to get out of my comfort zone, I have been in Jordan all my life, I know the ecosystem inside out, I wanted to be thrown in a new country, new company, new team and new environment and learn new things about myself and build a new network in Saudi.
• Foodics’ plan was to raise more than $100m in series C, we agreed that we will both focus on F&B and drop retail to grow 10x faster together, I truly felt my mission is not over yet with this company, I wanted to continue working in this great industry.
• I had a strong feeling about complete instead of compete, we were in Jordan, Kuwait and Egypt and were market leaders in those countries while Foodics were in Saudi and UAE.
• The vision from Foodics is to be listed in the next 2–3 years, this is something I was never exposed to in my professional career, I was excited to join a company on the road to IPO to learn.

I discussed these options with the board and they were VERY supportive and kept telling me “You will decide this is your company”, and honestly this is one of the most important things that any founder should strive for, your shareholders and BOD will either make or break your company, I was lucky to have a very forward thinking & supportive BOD, they were very involved in the business as we used to meet unofficially multiple times a month not only quarterly, and always gave advice and never forced any decision, they always made me feel I am in control but gave very valuable input, so we all agreed that this is the route that I wanted and started the negotiations with Foodics.

It was a great experience as I was the only person negotiating from Rocket’s side, I wanted to hear from them first, they did send an offer ( low offer of course🙂 ), luckily we are in the same business, so for us to reach to a valuation specially that we will be converting shares into Foodics’ currency, I shifted the conversation on having the same framework in calculating the valuation, believe me this is a very sensitive area, they were our biggest competitors and I was very worried about exposing any numbers to them.

I then decided to start, and I actually shared our MRR, sent a counter offer and explained to them why I think we are worth this much, they then shared their MRR, and we used the same multiples but they managed to get a premium because they had higher ARPU & lower churn being in Saudi, and they were in the payment business, which made sense, so they took additional multiples.

We finally agreed on the valuations and the size of the deal, are we done? Of course not! few of our shareholders decided they wanted to cash-out 100%, so the minority cash proceeds offered by Foodics will not be enough for them to cash-out 100% and pay to other investors pro-rata.

Foodics also offered different class of shares to our investors who are converting which was problematic to venture capital firms, so things started to get out of control a bit here! I then called Ahmad and told him the situation, I told him Ahmad if we want this deal to go through I think it is best if you give the option to buy everyone out and I will stay with ESOP.

Can you guess what was Ahmad’s response? he told me literally “Done, let’s buy them out” I was like mmmmm Ahmad, you only raised $20m in your “series B” I am not sure you have enough cash to buy them out, he then told me “Give me one hour 😄 “

One hour later, Ahmad calls me and told me “DONE” 😮 we managed to raise a quick convertible round from our current investors and we are willing to buy your shareholders out. I was amazed and went back to our board and told them the situation, they were aligned and this is where we wanted to formalize things so I can inform all my shareholders and team, we then asked them to send us a term sheet.

Term-sheet was signed, majority of our shareholders cashed out at a discount of the original valuation since there is no risk on them, and few shareholders decided they wanted to continue the mission with Foodics. I personally cashed out a portion of my shares and converted the rest into Foodics’ shares, all shareholders made good returns on their investment and this was my duty to them. I would like to thank everyone of them who believed in the team and our mission and for their endless support during the journey, also most importantly the BOD who were very supportive during the whole process, which we used to meet twice a week so we can have a smooth transaction and to also keep me sane🙂

All ESOP holders had acceleration on their stocks and the option to cash-out up to 50% of their shares, anyone left the company cashed out 100% of their ESOP which was a great achievement for all Astronauts.

The whole process from the first phone call till signing the final agreement took us 6 months.

In part 3, I will share with you all the leanings during the post merger with Foodics, stay tuned🙂