The Kellogg Alumni Club of West Africa recently hosted an event titled "The Anatomy of a Deal" at the US Consulate General. Guests include Peter Obi, a fellow Kellogg alumnus, and representative from the US Department of Commerce, who plays a key role in facilitating US-Nigeria business collaborations. The event provided a platform for an in-depth discussion about the landmark Mavin - Kupanda - UMG deals, considered to be one of Africa's most significant venture capital exits in the music industry.

The Kellogg Alumni Club of West Africa was established to strengthen Kellogg's presence in Nigeria and across West Africa, enhance brand awareness, and foster connections and opportunities among alumni. The club will be organizing events that reflect Kellogg's core values, with a focus on authentic leadership.

The session, moderated by Ada Osakwe, Co-President of the Kellogg Alumni Club of West Africa, dissected the DNA of Kupanda Capital and Mavin Records' relationship, focusing on the art and science of value creation in the creative sector. It featured just Tega Oghenejobo, COO of Mavin Records, and Linda Oramasionwu, Founding Partner of Kupanda Capital as panelists.

Watch the full session on Youtube

...or continue reading below

THE ORIGIN STORY

The floor opened with the origin story of the deal, shedding light on initial interactions between Kupanda Capital and Mavin Records. Tega recounted the first communication in September 2016, emphasizing the role of Rima Tahini, then a senior associate at Kupanda Capital, who initiated contact with Don Jazzy via IG DM. 

“We were looking for an entity with a track record that had already made stars and had the ability to do it over and over again. And there was one name that resoundingly came up over and over again, and that was Don Jazzy.” - Linda

This marked the beginning of a two-year courtship between the two entities. Mavin Records, at the time, was not actively seeking investment, and the idea of raising capital was foreign to them.

“We had the term sheet exchange, and the deal almost fell through later. We started watching, the TV show called Silicon Valley and that became a very definitive moment for us in the process” - Tega

What is Term Sheet

In Venture Capital, a term sheet is used to outline the basic terms and conditions of an investment deal between a startup and a venture capital firm. It covers key aspects like the investment amount, company valuation, ownership stake, investor rights, and other provisions shaping the relationship between the startup and the investor. Term Sheet acts as a non-binding agreement, subject to further negotiation and due diligence before finalizing the investment deal. 

I wrote about Term Sheet last year; read more on it here

Linda mentioned the importance of trust and value creation, noting that Kupanda Capital took the time to understand Mavin's business model, which was heavily cash-based and naira-denominated at the time. Together, they built the financial infrastructure necessary for growth, transforming Mavin into a digital-first company with a strong foundation in hard currency—a vision that proved crucial during the COVID-19 pandemic.

"If we were looking for a perfect balance sheet and P&L at that point in time, we wouldn't have done the deal. This was a business that was over 90% cash and naira-denominated when we started, but it has inverted to over 90% in hard currency today" - Linda

They both emphasized the importance of transparency, patience, and cooperation in bringing the deal to fruition. Tega noted that not many business owners would be willing to disrupt their systems for an uncertain future, but Don Jazzy’s willingness to embrace change and trust the process was key to the partnership's success.

INCEPTION OF THE MAVIN - KUPANDA - UMG DEALS

First, Kupanda’s offer stood out for Mavin. Unlike typical music industry investments, which often come with rigid terms and acquisitions, Kupanda’s approach was ecosystem-oriented. They valued the broader picture rather than just the product. This trust and understanding of the importance of the ecosystem were rare and led to a strategic alignment between both parties.

"Most of the [other investors] just really cared about product commitment and we don't just want to be one tree in the forest. It doesn't make any sense. We're not even protected if we build in that kind of ecosystem" - Tega

Linda explains that the business first took several operational steps, including critical hires like Rima as Head of A&R, as well as key roles in Operations and Finance. These hires were important in driving growth, which she likens to a 'hockey stick' curve, fueled by a mix of preparation and some luck.

Mavin leveraged Kupanda’s investment to gain distribution deals without relying on advances or long-term licensing deals. This strategy of maintaining independence and securing short-term deals positioned Mavin as a formidable player.

"We came with our own money. We didn't ask for any advance. So, it shocked the system" - Tega

Linda further explains that Mavin's ability to penetrate the difficult US radio market with a viral song [Calm Down - before Selena Gomez] took people by surprise. This success led them to seek counsel from Shot Tower Capital, helping them navigate the market and understand the true value of their business.

"We were looking for potential partners who recognized Africa as a genuine growth opportunity, not just a trend" - Linda

Tega adds that having support from a banker [Shot Tower Capital] and Kupanda in managing the UMG conversation was important. It allowed Mavin to focus on daily operations which was critical in recording more growth even during due diligence.

"That banker process super-educated me, as an individual and entrepreneur" - Tega

DUE DILIGENCE STAGE

In 2019, when the Mavin-Kupanda investment happened, it was mutual education with Mavin teaching their investors how their business model worked, which would differ from global norms.

"We had a lot of external consultants suggesting how to structure the agreements. However, to Mavin’s credit, we took advice from experts in other jurisdictions and ultimately decided that our agreements needed to look different" - Linda

For UMG, key focus areas for due diligence were corporate governance, tax efficiency, HR, financial management, and overall business strategy, which includes their executive talent program. Mavin’s approach to contracts [no long licensing deals] and in-house capabilities [such as internal content team] also stood out.

"Everything we're doing was so systematic; they were amazed at how we did it, especially considering it wasn't traditional music money" - Tega

The due diligence process for the Mavin-UMG deal spanned about two years, including pre-due diligence with bankers to ensure marketability. Initially, the bankers rigorously verified every claim and document provided by Mavin. This was followed by a more intense review to meet the standards of publicly traded companies, focusing on quality of earnings, corporate governance, and thorough documentation of board meetings over the years. This process underscored the importance of building a transparent structure capable of withstanding any level of scrutiny.

We were asked to provide minutes from every quarterly board meeting over the past 5 to 6 years. - Linda

The partnership between Mavin Records and Kupanda is a blend of strengths: Mavin's expertise in artist development and marketing combined with Kupanda’s business development acumen. This alignment, coupled with great planning and projection, highlights the seriousness of creative ventures, especially when managing significant investments. As Tega emphasizes, even creative businesses must adopt a serious, structured approach, especially when dealing with other people’s money.

NEGOTIATION, VALUATION & CLOSING STAGE

During the negotiation and closing stage, key considerations centered around valuation and strategic alignment. Linda explained that Mavin was unique, with both net label share and publishing assets, but more importantly, it was a rapidly growing company with frontline artists. This growth potential factored into the premium valuation. Mavin was operating in a market where larger strategic majors had struggled, yet Mavin had succeeded. With no precedent transactions in Afrobeats to compare, setting the right value wasn't easy.

She also spoke highly of the role of their banker, David Dunn from Shot Tower Capital, who helped navigate this process, as they used metrics from other fast-growing jurisdictions to guide their valuation strategy.

Tega added that for their eventual partner, UMG, Africa's potential was clear, and Mavin’s track record in the continent made them the best partner to deliver on UMG’s ‘Africa’ mandate. The strategic initiatives Mavin brought to African entertainment further reinforced the value and uniqueness of this deal.

POST-INVESTMENT INTEGRATION PROCESS

Tega shared that the ongoing post-investment integration process has been respectful and supportive. UMG doesn't want to change Mavin's approach; instead, they're providing more resources to improve what Mavin is already doing. The focus is on speeding up certain processes, such as how financials are reported to align with UMG’s obligations as a publicly traded company. This includes ensuring transparency with staff, confirming no ghost workers, and refining promotions and distribution supply chains to operate efficiently across multiple territories.

Some of the questions from attendees during this section were around the following:

Creative Control Between Mavin & Kupanda

Kupanda approached the Mavin deal with a clear understanding that artist development was not an area they intended to get directly involved in. Despite attempting to, during due diligence, they quickly understood that this wasn’t their expertise, nor was it how Mavin operated. Kupanda's role was to support Mavin based on their proven track record, rather than trying to influence creative decisions.

Linda mentioned that she doesn't listen to Mavin songs until they're released, preferring to experience them as the public does. This emphasizes Kupanda’s trust in Mavin's expertise, focusing instead on providing the necessary infrastructure, cash management, and the right team to support Mavin's success, rather than interfering with the creative process.

Creative Control Between Mavin & UMG

The February announcement of the Mavin - UMG deal stated that "Mavin will maintain autonomy over its strategy and future talent development, while Founder/CEO Don Jazzy and COO Tega Oghenejobo will continue leading the company"

However, Tega reiterated Mavin’s focus on retaining autonomy over its operations is very intentional. The thought process behind choosing UMG as a partner was influenced by its reputation as a home for entrepreneurship. Tega admired how many label leaders within UMG ran their businesses with entrepreneurial freedom, with shared centers, cultural units, and various independent operations. During due diligence phase, it was made clear that operational autonomy was non-negotiable and Mavin’s ability to keep outperforming their numbers even when the conversation was ongoing gave them an edge in negotiation.

Choosing UMG Over HYBE and Others

UMG's team demonstrated a high level of cultural understanding and seriousness right off the bat. Their approach was not only professional but also resonated with Mavin's own values and business practices.

Moreso, Mavin was already in business with UMG through their work with Rema (via Virgin) and Ayra Starr (via Republic). This existing relationship made the transition smoother and more familiar. Ultimately, the decision came down to UMG's alignment with Mavin's financial goals and their proven track record of showing up and meeting expectations.

Mavin As a Digital-First Company

Initially, the focus was on touring, which seemed to be a significant revenue source. However, it's now recognized that touring has a low-profit margin due to high cash flow demands and logistical complexities. In contrast, streaming offers a more sustainable revenue model with continuous income generation over time.

While major artists like Taylor Swift and Beyoncé can command high ticket prices and leverage, the same scalability isn't easily possible in Afrobeats. Streaming allows for steady revenue without the physical constraints of touring.

On Value Creation Between Kupanda & Mavin

Kupanda’s approach focused on building a scalable business rather than just investing in music. Key steps included strengthening Mavin's financial function with critical hires like Ifeoma (Director of Finance), who grew from a key initial hire to collaborating with a team of 20 from global consultancies. Kupanda also emphasized organizing and categorizing revenue, such as through detailed P&L statements for each artist, which helped in understanding the financial impact of creative work.

Rima, as an A&R, has P&L records per artist. So, it's not just about vibes. The vibes matter but you have to understand how those vibes are translating - Linda

Their value creation extended to sourcing diverse consultants from various industries, which provided fresh perspectives and further validated Mavin’s potential. This approach not only enhanced their business operations but also deepened their trust in the partnership and the market.

About a Future Where Such Deal Becomes a Norm

Reflecting on Mavin’s success should be a catalyst for others in Africa. Their decade-long journey should be an inspiration and a nudge for creatives to focus more on their business practices—such as maintaining better financial records or seeking experienced advisors. Creative professionals can use Mavin's achievements as a model for their growth.

"When we closed the deal, I said this for Africa" - Tega

Also, financial backers should observe how Mavin's approach has reshaped the market and invest with patience and insight. If this alignment between creative talent and patient capital becomes more common, it will drive substantial value across the industry in five, to six years.

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