Introduction
The pursuit of growth is imperative for businesses in today’s fast-paced and increasingly globalized market landscape. Among the various strategies that companies employ to achieve this objective, mergers and acquisitions (M&A) have emerged as a potent and widely adopted approach. The African mergers and acquisitions landscape has expanded significantly over the last ten years. According to data from Baker Mckenzie, the value of M&A deals in Africa reached $82 billion in 2021, up from $27 billion in 2020.
Mergers and acquisitions in the Sub-Saharan African market remain dynamic after a record year in 2022. Despite political turbulence and economic challenges, investor interest stays solid. In 2023, 304 deals were recorded, with a total value of $18.9 billion, according to KPMG’s report, “Doing Deals in Sub-Saharan Africa 2024,” published in October. The momentum accelerated in the second quarter of 2024, with M&A deals hitting $11.8 billion, the highest value in two and a half years.
M&As are gradually becoming a prominent feature of the African tech ecosystem. Tech and telecom startups are fast-growing sectors that have had large M&A deals. Notable acquisitions, such as the purchase of Paystack by Stripe, illustrate the continent’s growing
tech scene. These deals support innovation, connectivity, and digital transformation, positioning Africa as a growing tech hub.
Financial and strategic buyers often come up frequently in conversations on financial transactions as the two major categories of investors involved in M&A deals. This article explains these types of investors, their motivations and objectives, and examples in African tech transactions.
Strategic Buyers
Strategic buyers are investors who acquire businesses to elevate and expand their existing businesses. A strategic buyer is typically a much larger company that purchases a smaller company, which it views to be a strategic fit, either wholly or partly (taking controlling stakes in its subdivisions), to stimulate its growth and value synergies, with a critical focus on boosting profit margins and enhancing shareholder value through cost savings opportunities or increased revenue generation. Cost savings are achieved through integration into existing operations, thus achieving economies of scale by merging business operations and services and eliminating criss-crossing functions in Sales, Marketing, Human Resources, etc. In strategic purchases, revenue generation is quickly ramped up
due to automatic access to a more extensive customer base, new markets/jurisdictions, and complementary/bundle product sales opportunities.
Strategic buyers conduct transactions considering their long-term vision and strategies and, as such, can pay more for acquired companies compared to financial buyers as they have easier access to capital and can realize synergistic financial gains in increased revenues and intangible gains in brand perception, reputation, and customer satisfaction. With a focus on vertical or horizontal integration with its existing portfolio, or both, strategic buyers acquire companies in similar or related industries whose businesses they already understand or don’t and are trying to leverage to get into that market. Strategic buyers can also improve offerings and services to the customers, employees, and other stakeholders of the acquired company as they can leverage their operations, which are on a bigger scale, in doing so.
Examples of Strategic Buyer Transactions in African Tech
In 2021, Flutterwave acquired Disha in a move to play a significant role in the creator economy. Flutterwave, Africa’s leading payments technology company, and Disha, a digital creator’s platform for curating and selling content, agreed to this deal to enable Flutterwave to improve offerings for the Disha users and learn more about the sector.
In 2022, Ghanaian mPharma acquired a majority stake in HealthPlus to improve health outcomes for Nigerians and Africans. The acquisition was a major one as it provided mPharma — Africa’s foremost patient-centered HealthTech company, access to an ever-expanding network of pharmacies across Nigeria operated by HealthPlus — a Nigerian pharmacy chain, to strengthen its Nigerian presence and embolden its vision of providing affordable and accessible healthcare on the continent by transforming pharmacies into primary care centers.
In 2023, GBarena, an Egyptian esports platform, acquired Tunisian gaming startup Galactech. The deal, worth 15 million USD, was a complementary strategic fit to combine strengths and maximize resources. GBarena looked to expand its reach, strengthen its foothold in the thriving gaming market across the MENA region, and continue to deliver unparalleled esports gaming experiences for its users.
In 2024, Lesaka Technologies and Adumo, both major players in the
South African FinTech environment, agreed to a deal that saw Adumo fully acquired for 96 million USD. Lesaka, which provides a wide range of financial services to consumers, merchants, and enterprises, took over Adumo, the largest independent payments processor in South Africa, to solidify its position as the natural consolidator of Southern African FinTech services for millions of customers with operations in over five countries.
Financial Buyers
Financial buyers are professional investors who acquire businesses, improve them, and then sell them for significant returns on their investment after some time, usually 3–7 years.
The acquisition strategy of financial buyers is focused on thoroughly examining stable, promising, and moderately priced companies and their ability to generate positive cash flow and reduce expenses within the shortest period. When evaluating companies, they conduct a more stringent and time-consuming due diligence process on the company and its leadership, compared to strategic buyers, to mitigate or circumvent potential pitfalls that could negatively impact their objectives. From day one, they will have an exit strategy either with an outright sale (to another financial buyer or a strategic buyer) or a listing on a stock exchange. Therefore, they are highly under pressure to hit targets, entirely focused on consistency in profit generation, and cannot wait for their investment’s potential long-term or synergistic benefits.
Financial buyers are typically non-traditional, institutional investors (Venture Capital, Private Equity, Hedge Funds, etc) who are open to investing, usually using leverage (debt), in a wide range of companies and industries provided they meet their requirements. Financial buyers typically allow the sellers to retain part ownership of the businesses and continue the day-to-day operations. They are less likely to interfere with the current structure or leadership of the company to maintain what is already working. However, they may nominate specific individuals as board members to represent their interests and for general oversight, guiding, and advising where opportunities arise to supercharge revenue generation, reduce costs, or create economies of scale, and will always ensure that financial targets are achieved.
Examples of Financial Buyer Transactions in African Tech
In 2022, Verod Capital (Verod), an Africa-focused PE firm successfully exited Daystar Power Group (Daystar), a pan-West-African hybrid solar technology company
providing affordable and clean energy solutions for commercial and industrial businesses, to Shell Plc (Shell). Verod had invested and supported Daystar since 2019, guiding it to become a significant player in its industry, with further expansion on the horizon. Shell’s acquisition of Daystar was a strategic move geared towards strengthening its renewable & energy solutions business and contributing to its target of being a net-zero emissions energy business by 2050.
In 2023, Ventures Platform and MaC Venture Capital led an investment funding round to support Shekel Mobility, a digital marketplace and management system for African auto dealers. The round, worth 7 million USD comprised of 3.2 million USD in equity and over 4 million USD in debt. Shekel Mobility sought to expand its operations in Nigeria, facilitating the end-to-end process of buying/selling cars to other African markets.
In 2024, SeamFix, an African digital identity solutions provider, secured 4.5 million USD in investment from Alitheia IDF, an Africa-focused VC and PE firm. SeamFix seeks to utilize this fresh capital injection to reimagine ID verification, scale up its technology infrastructure across Africa, and connect the continent to the rest of the world.
In 2024, CardinalStone Capital Advisers (CCA) fully exited and sold its 65% stake in i-Fitness, the foremost technology-enabled chain of fitness centres across Nigeria, to Verod Capital. CCA and Verod Capital, both Africa-focused Private Equity firms, conducted a 12 million USD transaction, poised to push the business forward and stimulate more growth. CCA, which partnered with iFitness in 2019, successfully guided it to stellar success — a 766.67% increase in subscriber base, a 320% increase in physical locations and a 500% increase in staff strength.
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