CWG Plc (formerly Computer Warehouse Group Plc) is one of the leading technology integrators and operators in Nigeria. Founded by Austin Okere, the firm dates back to 1991 when it was largely a hardware supplier and integrator. But quickly, the company evolved, providing solutions especially to corporate clients in the areas of VSAT, metropolitan, wide and local area networks. If found success and in 1999, it acquired Expert Edge to emerge as a software solution and training powerhouse, in Nigeria.
Today, CWG Plc is a Nigerian success. It is built with tenacity, vision and excellence, despite all the odds for such a company in Nigeria. Few banks in Nigeria can open their branches tomorrow if CWG cannot work for six hours. Its impact is huge and it permeates many sectors in the Nigerian economy.
It is a company of three core areas – hardware, networks and software- all integrated. And it is growing with operations in Ghana which was opened in 2003. The company was one of the firms that demonstrated the value of shared resources when it consolidated all its businesses for leaner, efficient and more focused operations in the market. Besides Ghana, which handles the Western African business, excluding Nigeria, CWG operates in Uganda and Cameroon for East and Central African business opportunities, respectively. It went public in 2013 in the Nigerian Stock Exchange. It is ISO9001 certified and was recognized by the World Economic Forum (WEF) as a Global Growth Company. This public-traded CWG is worth about N6.4 billion (~$22 million) according to the Bloomberg Markets. (Nigerian Stock Exchange is always hostile to tech companies, decimating their values.Beware.) This company, in our estimate and using our model, is worth excess of $60 million, largely because of many strategic exclusive partnerships it has with foreign companies.
Key Attributes of CWG Plc
- Nationwide operations with experience dealing with nuances of Nigerian business climate, at scale. It is one of the few companies in Nigeria that can provide IT support to nationwide operating firms.
- Deep experience in manufacturer representation. CWG represents many foreign brands as a local partner. This is how it makes most of its revenue. It is not necessarily a local innovation powerhouse with its own core intellectual properties. It is an integrator and it uses scale to support its clients. Recently, it has deepened capabilities in digital products, nevertheless. But most of the bank solutions it supports are with foreign partnerships
- African operation remains limited. Its strong base is Nigeria and lack of deep inside operations in markets had not delivered its full pan-African mission. It needs to be in Congo DR, Kenya, Ethiopia and cannot be meeting their needs from satellite regional offices.
- The innovation is business-model oriented doing what it does at scale. It has to bring technology-centered innovation to improve gross margin in its business.That will mean having the capacity to own the IPs of some of the solutions it delivers and supports.
SystemSpecs is one of the most innovative local IT companies in Nigeria that actually makes money. It has also evolved over the years. Though in the past it had represented a foreign software company for its Fixed Asset and Inventory Management software, SystemSpecs, which is privately held. has branched into making its products, in house. Its flagship HumanManager is one of the most successful local technology brands in Nigeria. Many banks and financial institutions depend on its solutions to run their supporting operations.
It worked heavily with SunSystems which is still partners with for some of its solutions in the market. However, the success of HumanManager, a Payroll and HR processing software, gave the firm a lot of recognition and cashflow for growth. .HumanManager can be seen as one of the most successful local software products in Nigeria, ever, with extensive adoption in the market.
Founded by John Obaro in 1992, SystemsSpec operates in all the key sectors of the Nigerian economy. It is the company behind Remita which is one of the most exciting products in the country today. Remita helps the Federal Government of Nigeria to collect and manage payments, under the Treasury Single Account project, earning commissions in the process. Increasingly, Remita supports other institutions besides governments, to receive and make payments, as typical with electronic platforms. The firm is a pioneering local software company and is assumed to be the most successful. Besides software, it also offers solution delivery, training and maintenance services.
SystemSpecs is Nigeria’s finest software powerhouse with all the attributes you expect from local brands. However, SystemSpecs is inherently local and leaving opportunities in Africa despite its strengths. That is why we think it needs to combine with CWG to lead Nigerian IT sector into the continent, with more vigor and energy.
“Merging” A Public and Private Company
Together SystemSpecs and CWG can go far. But one is public while the other is private. So largely, only reverse merge can work here. Another is pure acquisition but do not go there. Certainly SystemsSpec is worth more than $22 million the market assigns to CWG Plc, making any talk of acquisition baseless. We also believe that CWG is more than what the market is valuing it, as has noted above. The best way this can work is to for the company to emerge, “post-merge”, as a different public traded company. “CWG”, the three letters, is a more marketable and differentiated name than “SystemSpecs” which is amorphous, but keeping it will confuse traders. So they need to find a new name. We propose CSSG Plc, removing the “W” in CWG Plc and replacing with “SS” from SystemSpecs. CWG cannot afford to swallow SystemSpecs and SystemSpecs cannot afford to take CWG private; this strategy will be a compromise. CWG goes private and then emerge public with SystemSpecs at a better market valuation. As they grow, in Africa, they could also consider listing in the Johannesburg Stock Exchange which has more liquidity. (You can call this reverse merger or anything you prefer, but do not call it acquisition of SystemSpecs by CWG.)
Why A “Merger”?
For these two companies to scale and become a pan-African operation, they need to come together. Nigerian companies are not necessarily good in doing this because we like to control 100% all the time. But this is what will help the two firms compete against South African firms like Business Connexion which is expanding rapidly across Africa. Besides, IBM. Atlas Mara, and Accenture are competitors in some sub-sectors in what CWG does.
A merger will provide the following:
- Liquidity to fund pan-African growth in areas of marketing and business development
- Capital to expand SystemsSpec R&D into new areas of software especially Artificial Intelligence making sure that its solutions are upgraded and ready for new and evolving market needs
- Operational scale to reduce per-unit cost. That will cut expenses in management and drive the businesses to more profitability. It can also help them to bundle their services more efficiently.
- Produces a business that can aggressively enter into new markets while having an innovation engine behind for new product lines. The old-CWG will provide the business development and support while SystemsSpec power the merged firm with new product lines
- Systematically reduce focus on foreign manufacturer representation and then moves into building Africa-themed solutions in-house
- Take Remita Africa-wide as quickly as possible. We do believe that Remita can compete in the evolving fintech world. With the free cash it is earning in Nigeria with its present contract with the federal government, the merged firms can fund growth, across African cities.
- Push with the combined resources into the major pain areas in the African economy with software solutions for agriculture, informal economy, transportation, etc. They have to go beyond financial, public and oil & gas sectors. Future growth is poised to come from bringing under-served Africans into the financial sector. The new firm can play a role developing technology the banks and insurance firms can use to provide services to these fellow citizens. The Asian and Western firms lack the capacities to understand the challenges here and the new CSSG Plc has an edge. Besides, CSSG Plc can pioneer tools and solutions to make corruption difficult at least in procurement phase.
CSSG Plc will have more capacities to compete against IBM, Atlas Mara and other leading technology integrator brands in leading African markets. It will also begin that glorious era where Nigerian IT companies begin aggressive push to earn foreign exchange across the globe. The bravado of CWG Plc and the intellectual ingenuity of SystemSpecs will lead to a new corporation that will have more opportunities in Nigeria and beyond. That is why we call for a MERGER or simply want them together.
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