Egypt's dealmakers are suddenly very busy. E-Finance, Egypt's listed fintech champion, is reportedly moving to acquire microfinance lender Family for as much as £5 billion — with most of that price paid not in cash but in E-Finance's own shares. Two years ago, Family changed hands for around £2.8 billion. Today it is being valued at nearly double. Joining me is Ahmed Elleissy Nasef, board member, international strategic management consultant, and author of Stories of Corporate Success and Failure. Ahmed, welcome back.
Thank you very much.
From your research into companies like Kodak and Nokia that looked unbeatable and then collapsed — when a company announces a big acquisition, what is the pattern that tells you early whether it will create value or become an expensive mistake?
For any acquisition there are three things to examine. First: strategy — why are we doing this, what capabilities, customers, technology, or market access are we getting? Second: price — are we paying the right amount for that advantage? Third: execution — can these two companies actually be integrated to deliver the expected synergies? A good company does not necessarily mean a good acquisition. A good company can still be a bad acquisition if we pay the wrong price. From Nokia and Kodak, we learned that acquisitions are not about size — they are about creating value. The most dangerous acquisition is one where management falls in love with the concept or the size, without the right strategic perspective to build value for shareholders.
The target was reportedly bought for £2.8 billion two years ago and is now valued at nearly double. When a board sees a target's price almost double in two years, how does it tell the difference between paying for real growth and paying for momentum?
The jump is almost 80%. The question sitting in any boardroom should be: have the profits increased dramatically, has the loan portfolio grown and improved in quality, has the customer base expanded accordingly? Have the economics fundamentally changed to justify 80 to 90% growth in the value being paid? And crucially — you should never pay the seller for value that has yet to be created. That has to be value already there. The exchange rate effect on valuation is also something that needs to be factored in.
The deal is reportedly structured as roughly £1 billion in cash and the rest in E-Finance's own shares — about 4% of its equity. When does buying with your own stock make sense and when should shareholders get nervous about dilution?
Paying partly in shares can be very sensible. It preserves cash and it shares the risk with the seller — keeping them economically invested in the success of the combined company. Existing shareholders will always ask: how much of my company are we giving away? But the more important question is: what are we getting in return? If you dilute shareholders by 4% but create value worth much more than 4%, then it is worth it. It is like a cake — you are getting a smaller slice, but the cake itself has grown enough that even with a smaller percentage, the value you hold is higher. It can go both ways. But in general, paying partly in shares is often a wise decision.
E-Finance is a payments infrastructure company buying a lender. More cross-segment moves are happening in Egyptian financial services. How does a board test whether this is genuine strategy or empire building?
One simple sentence: diversification is not a strategy. Competitive advantage is. The key question is: can E-Finance do something with this combination that other owners could not do? If combining payments, data, customer access, and lending creates a genuine competitive advantage — more cross-selling, lower acquisition costs, better risk assessment, higher profitability — then there is strategic logic. But management must be able to quantify all of that. If they cannot, it is empire building, not strategy.
Thank you, Ahmed. A great pleasure having you on the show.
Thank you very much.
