Bloomberg Línea — Mexican proptech Casai and Brazilian counterpart Nomah, the latter having been acquired by Brazilian unicorn Loft in 2020, have announced a merger.
Under the deal, Loft is transferring its shares in Nomah to Casai and investing in the new company.
Both companies operate on a flexible, short- or medium-term property lease business model.
The two companies’ current investors, Andreessen Horowitz and Monashees, are also putting money into the resulting company. Casai and Nomah have not disclosed the value of the transaction.
Bloomberg Línea revealed that Mexican startup Casai had tried to raise money from these investors before, but no money came their way. In July, Casai CEO Nico Barawid reportedly told employees that the company was running out of cash and hoped to close a merger with Nomah as soon as possible.
Casai had been in talks since September to raise a Series B, Bloomberg Línea reported. But the situation became more complex when the round (whether B or even an extension of the A round), did not materialize.
For his part, Florian Hagenbuch, founder and co-CEO of Loft, had long sought to leave Nomah and take it into a merger.
Now, Loft is the largest shareholder in the newly merged company. Bloomberg Línea reported that the new entity was even considering receiving funding from reggaeton celebrity Daddy Yankee. But Casai says there are currently no new investors.
Loft said in a statement sent to Bloomberg Línea that the merger is a solution that preserves the service, jobs, and innovation environment of the short-term accommodation market in Latin America, while “making room for the emergence of a company capable of being sustainable in the new global context”.
A person with knowledge of the matter who preferred not to be identified said that Nomah is considered a standalone company within the Loft group.
“We will consolidate the expertise and portfolio of both companies with this merger”Nico Barawid, Casai CEO
Six months of integration
Loft has laid off 543 staff since April. Nomah, meanwhile, laid off 30 employees in early August, while some Nomah employees received an invitation to migrate to Loft, according to the source.
“We will consolidate the expertise and portfolio of both companies with this merger,” Barawid said in an interview with Bloomberg Línea.
“In the next six months, we are focusing on building a strong brand to dominate the market. We have about 3,000 units between Mexico and Brazil, and we are excited to work together.”
Bloomberg Línea had reported that Nomah CEO Thomaz Guz would stay for six months to work on the integration of the companies, and then leave the company, but when asked for confirmation of that, Guz said “that is not defined”.
“I will stay working together [with them] and I am a shareholder in this new company, so I want to have a long-term relationship and generate the best value. I’m completely focused on our challenges now,” he said in an interview with Bloomberg Línea.
Among the challenges of integration are the culture, the team, and especially the portfolio of the Brazilian and the Mexican startups .
This year, Nomah hoped to extend its operation to the northeast of Brazil and had closed a partnership with real estate developer and builder Haut, from Pernambuco state. Asked whether this contract will be maintained, Guz said that “there is still no definition regarding the portfolio”.
“We have a very strong relationship with developers all over Brazil and we want to continue working close to them with Nico and Casai,” Guz said. More than 90% of the apartments managed by Nomah are in São Paulo.
With Casai, the idea is to expand next year in Brazil, Mexico, and other Latin American countries, as the biggest player for short stays in the region.
Merger, the light at the end of the tunnel
For Casai, Mexico was underperforming compared to the Brazil operation. A person familiar with the matter said that in one year of operation, starting during the pandemic, Brazil had almost tripled in size compared to Mexico, which was already three years in operation.
“It seemed they just wanted to do their job and go home without worrying, that they thought it was ‘fancy’ to work in a co-working space in the most upmarket neighborhood in Mexico City. They didn’t know where they were and had little objectivity of where they wanted to go,” said a person privy to Casai’s operations in Mexico, who asked not to be named.
The same source said they looked like two different companies. One in Brazil, which was working well, and one in Mexico, where teams were struggling to “solve inefficiencies”, the source said.
“Unfortunately, Casai suffered the same drama of many companies, a somewhat retrograde leadership, which concentrated the power of important decisions, took away all the autonomy of the teams with a lot of micromanagement which, in the end, did not represent nor exercised the values they had created, which were, in a word, incredible,” the source said.
“I had never worked in such a good environment, but many people in strategic positions did not see the complexity of the business and how the decisions they made impacted negatively on other areas of the company.”
In Mexico, Casai laid off at least 20 employees and, reportedly, did not pay severance in full.
The company proposed an agreement with some staffers to be paid in installments. In Brazil, the payment to at least 60 employees who were made redundant was made in full, as required by the local labor laws.
“We are negotiating with employees in Mexico,” Barawid said, while Guz said:. “we are still analyzing how the team will look with the merger”.
Now, with the support of investors, Casai’s focus is to build a sustainable company and reach breakeven“Casai’s business has been performing very well and our company has never had less than 85% occupancy in its units. Our revenue has been growing and customer satisfaction is incredible,” said Barawid.
The Mexican entrepreneur, who is now spending time in São Paulo integrating the two businesses, says he found “a light at the end of the tunnel” with the merger.
“We have been adapting to the new macroeconomic scenario and seeking to have a sustainable company instead of focusing on growth. It is a reminder that it is important to focus on the fundamentals of the business. If you build a strong company with a strong mindset in sustainability, you will always succeed in the future.”
-- Yanin Alfaro contributed to this story