Mergers and Acquisitions growth strategy
As startups across Africa continue to be increasingly attractive for investment and global attention, the African startup ecosystem is maturing remarkably. A critical high-growth strategy that can work for many companies is by leveraging mergers and acquisitions. Patel details how Disney utilized this strategy in growing and expanding its business into newer niches and more novel markets. He highlights how M&A falls into the two categories of strategic and financial, with growth being the primary goal of any acquisition move. It is crucial that a startup is keen on ways of growing strategic alliances with partners to broaden its horizontal and vertical reach across the market. Simply put, M&A is about buying resources for growth.
Entrepreneurs are constantly finding ways to hack growth, especially as the market becomes more and more saturated and competitive. To stay afloat and ward off any sharks, it is important that the startup is thinking creatively of ways of leveraging the strengths and competencies of others in the market to strengthen its arsenal and buoyancy. Mergers and acquisitions could either be horizontal, where it concerns competitors in the same business line, or vertical, involving companies in different levels of the value chain within the same market sector. The third type of merger entails that which happens between companies in totally different lines of business and is called a conglomerate merger.
Mergers and acquisitions help in filling critical gaps in service and product offerings, enabling efficient ways of acquiring more talent and intellectual property, creating opportunities to leverage synergies, and finally saving time and long learning curves.
M&A in the African startup scene
In recent times, there has been a flurry of activity in the tech scene in Africa, especially on mergers and acquisitions. In 2021, there were a record 33 M&A deals captured, as compared to 17 in 2020. This growth in mergers and acquisitions is only proof of the greater connectedness of markets within the African startup ecosystem. Fintech, which has had a greater deal of activity across the continent, especially with fundraising, has had quite a number of M&As, particularly with MFS Africa’s acquisition of Beyonic in 2020, to broaden product and service offerings. Paystack’s acquisition by Stripe generated quite some buzz, especially as it heralded promising prospects for the fintech ecosystem. Other fintech companies that achieved acquisition ranged from Kenya’s exchange4free’s acquisition by AZA Finance, WayaWaya’s acquisition by Ajua, also in Kenya, Selpal’s acquisition by FNB, and Mangwee’s acquisition by Zeepay.
Yet other acquisitions can be seen in WorldRemit’s acquisition of Wave, Paga’s acquisition of Apposit, Emergent’s acquisition of Interpay, and Interswitch’s acquisition of Vanso.
In what is appearing to be a trend now, more mature fintechs at later stages of growth are acquiring smaller early-stage fintechs, to enable them to grow across the market, while also African banks are moving into the fintech space to acquire some buffer against the changing dynamics of the market.
In what is, yet, adrift from the normal route, Flutterwave’s strategic acquisition of Disha, a platform to enable digital creators to curate, and sell digital content, in order to drive payment expansion, appears much more strategic. Flutterwave had made this careful move with the acquisition of the content creation platform, to salvage it from closure, and at the same time, make significant gameplay in favor of the growing content creation ecosystem. While these moves are strategic for Africa’s biggest fintech platform, other moves across other parts of the continent are targeted at geographical expansion.
Egyptian proptech, Circle only recently announced its acquisition of community management platform, Milango. This acquisition establishes the growth of Milango’s client base with more than 100,000 residential units added. In Egypt as well, this year, Mowarrid was acquired by Saudi firm, Sary for an undisclosed amount. This acquisition reflects Sary’s expansion plans throughout North Africa’s geographical market. The company is hoping to lead the B2B e-commerce in the emerging markets starting with MENAP enabling a regional network to connect buyers and sellers throughout the different markets. The much-talked-of acquisition of MainOne by US Equinix for $320 million was one for the books last year, with Funke Opeke, CEO of the company, expressing how the partnership offers value for both companies. She highlighted that through the partnership, MainOne is aiding the process of bringing the value chain over to Nigeria, while being a part of the global platform, along with the partnerships with the global market.
In southern Africa, Yoco moved to acquire the leading fintech web3 software development agency, Nona Digital. The goal of the South African company is to find ways of increasing its reach across the continent and serve over one million entrepreneurs by 2024 through its payments software and capital products. Earlier in 2019 and in 2021, Yoco had acquired Cobi Interactive and Dado. In the wake of its $83 million Series C raise last year, the company is looking at consolidating its footprints across the continent and achieving greater market share.
How M&As are set to increase
With the African tech ecosystem continually growing across many sectors and indices, it is interesting to see how more mergers and acquisitions are crystallizing. More companies are finding the need to consolidate resources and unite visions to pursue more overarching goals. These show that the tech ecosystem is not only thriving but is doing so creatively. Especially in the area of fintech, where there are a lot of fintech companies, it will be interesting to see how similar companies get to synergize their efforts and reach to hit bigger targets.
Even as unicorns are spawned in even greater frequency across the ecosystem, more and more mergers and acquisitions are bound to characterize the African tech space. What this implies is that the ecosystem is bound to experience richer and more interesting interactions between players, looking to establish a stronger presence and share of the market.