"We Got Acquired!" Cartlow Buys Out Fellow UAE-Born Startup, Melltoo "Understand that acquiring a business is not about integrating but instead about accelerating the overall vision of the company."
By Tamara Pupic
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"At the end of the day, we build companies to benefit customers, employees, investors, and to leave the world a bit better than before," said Melltoo CEO Morrad Irsane, after news broke that his classifieds platform for second-hand items that he co-founded with his wife, Sharene Lee, was acquired by UAE-based reverse logistics platform Cartlow. "The exit is just one part of the journey; what goes before it is much more important. As long as we benefited customers, employees, investors, and have left the world a better place, we are satisfied."
The acquisition will see customers of Melltoo's 30 categories and over 500,000 products now be automatically redirected to Cartlow's platform to shop or sell their pre-loved and never-used items while also enjoying features like free delivery, 10-day return policies, and 12-month warranties. As for Cartlow, founder and CEO Mohammed Sleiman believes that the deal will allow the enterprise and its cloud-based technology to get a better foothold on the global reverse logistics market, which is projected to reach a value of US$958 billion in 2028.
Commenting on the process of the acquisition, Sleiman says that there is no specific formula governing the same. "It lies under one simple principle- understand that acquiring a business is not about integrating but instead about accelerating the overall vision of the company," he said. When asked about the key lessons he learned in the process, he first points toward the importance of remaining focused on one's future goal. "In most cases, the negotiation stage is where people get stuck," Sleiman said. "The company that you are trying to acquire will have a certain vision, and it's crucial to highlight how this vision will blend into your own company's vision and objectives to ensure success in the long run."
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Sleiman also suggests both parties in an acquisition process to make the effort to build rapport with the other side, as "it is more likely both parties will reach an agreement if they spend time getting to know each other and each individual's overall goal for the business." In addition, Sleiman also advises them to be open to smart trade-offs. "During negotiation, both parties are often stuck on specific challenges," he explained. "Therefore, capitalizing on the presence of those challenges is more likely to get both parties to reach an agreement."
For his part, Irsane believes that understanding why the acquirer wants to buy one's business is a good starting point. "This is very important in negotiations in order to create a win-win situation," he said. "Also, this understanding helps you assess how far you can push in negotiations. Then, my second learning is to be patient, as so much in the closing of acquisition deals is outside of individual control." His ultimate tip for other entrepreneurs is to be radically transparent, as "it will prevent delays and help all parties avoid unnecessary conflict." Irsane added, "Being clear (and getting things in writing) is necessary. Often, deals get thrown off course by small misunderstandings. Disclosing as much as legally possible from the beginning will smoothen the path."
Melltoo's acquisition comes after Lee and Irsane, who launched the company in 2014, have gone through three fundraising rounds for the startup, with the process seeing them talk with a total of 40 investors in total. "When we first started, startups were chasing investors, and venture capital was still a very small industry in MENA," Irsane recalled. "Fast forward eight years, there is a lot of money chasing startups now, and the landscape has changed." Having said that, Irsane says that there's a certain momentum within every fundraising process that startups need to maintain in order to have a smooth journey in this regard.
"While startup life is never predictable, and growth is never linear, startups are still expected to progress along a certain trajectory in order to get funded," Irsane explained. "This is one of the many challenges of fundraising in the MENA, as investors are not particularly forgiving when a startup doesn't follow the expected trajectory. To overcome this, startups have to be extremely honest and self-aware- don't try to fudge the numbers, or attempt to skirt around the issue. Address whatever failings your startup has head-on with investors; this is the only way to build credibility and trust."
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Cartlow founder and CEO Mohammed Sleiman. Image courtesy Cartlow.
'TREP TALK: THE ACQUIRER'S VIEWPOINT
Cartlow founder and CEO Mohammed Sleiman on what to keep in mind when considering an acquisition
1. Consider the rationale behind the acquisition "Why are you acquiring this business, and what is your end goal? This needs to be a very strategic move for you in the market. Do you know the ins and outs of the business you are planning to acquire, and what can it help you achieve in the long run?"
2. Know your competitors and market "Most entrepreneurs spend more time on their product than they do on getting to know the competition and the market. Always focus on what sets you apart from competition, and how acquiring a startup/another business can potentially benefit your overall ecosystem."
3. Assess the impact on your financials "Basically, get to know how the acquisition will impact your financials, whether it will improve or decrease your profit margins, and how it will impact your revenues."
'TREP TALK: THE ACQUIREE'S VIEWPOINT
Melltoo co-founder and CEO Morrad Irsane on what to keep in mind when considering an exit via an acquisition
1. Networking is critical "Exits happen in strong ecosystems, and ecosystems are built on networks. Be open to building long-term relationships with others in the ecosystem that are not purely transactional in nature. Don't be afraid to talk to your competitors. Our exit began with getting the right people to see value in our business, and this arose organically through a willingness to build relationships within the ecosystem."
2. Look for a win-win "Business acquisitions and mergers are based on value-added- not necessarily monetary value, but certainly, the value that can be generated through the acquisition. Founders tend to be focused on getting the maximum financial return for their company, but approaching an acquisition from this angle results in an adversarial relationship between parties, which means that the deal is volatile and susceptible to falling through."
3. Involve the team "Acquisitions impact the team to a large extent. It's important to get buy-in from the team and investors, and to involve them in the process. It's inevitable that hiccups occur in the course of an acquisition, and having the team be a part of the process means stability in business operations even when things look bleak, which is critical to ensure the completion of the deal."
