The challenge

A mid-sized investment firm, operating out of the UK, identified an opportunity in the payments sector in Africa. The opportunity was to acquire a majority share of a company that provides Direct Carrier Billing (DCB) across the Middle East.  

Its service enables customers to buy goods and services online and pay for them using their prepaid mobile phone credit. Based in Egypt and the UAE, the company operates across 16 countries and processes over 600 million transactions per year. Working in countries where a huge proportion of the population are unbanked, the company helps to improve financial inclusion.  

The investment firm specialized in emerging markets worldwide but had limited knowledge of the payments sector.  

How we helped

EDC was engaged to conduct the commercial due diligence, so that the firm could invest with confidence. The commercial due diligence included market sizing, competitive analysis, and technology review.

We worked closely with the investment firm to build a spreadsheet that modelled the total addressable market (TAM). It enabled us to ask “what if?” questions about regulation, competition, and changes in customer behaviour, which we could simulate in the model. From early on, we provided insight and emerging conclusions to the investment firm, so they could move quickly. They challenged us to justify our model and appreciated the opportunity to work closely with us on it.

The model was informed by our own specialist expertise in payments and was validated by additional research. As well as sourcing data points, we conducted expert interviews with our network of contacts across the region.

Following the market sizing exercise, we carried out competitive analysis. Our research looked at other domestic and global DCB providers, telcos, and other payment methods. The aim was to identify any threats to the target company.

For technical due diligence, we conducted interviews with board members at the target company, including the CEO and CTO. The CTO provided us with a technical architecture, and we validated the company’s cloud migration plan, ensuring they had planned the resources to meet their expectations of explosive growth.

“The thing the client valued the most was the high level of interaction with us, and the knowledge transfer they got from that,” said Martin Koderisch, Principal, EDC. “We could replay the interviews we conducted, which gave them insights they wouldn’t have been able to access themselves. We could find out more about competitors than they could. We were also able to talk to the target’s CEO about topics that the acquiring company might have found uncomfortable to discuss directly.”

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