Should More African Startups Consider Acquisitions?

Adobe's $10 billion acquisition of Figma, announced September 15th, 2022, sparked discussion about M&A in Africa's tech sector. This mirrors Stripe's earlier acquisition of Paystack in 2020, raising questions about optimal timing for tech business sales in Africa.

M&A Activity in Africa

According to the African Development Bank Group, M&A activity in Africa is driven by economic growth, energy, mining, and utilities sectors, and emerging industries. Between 2000-2015, M&A value increased 15%, though it decreased 21% from 2015-2019. The technology sector, particularly fintech, saw impressive 64% year-on-year growth from 2015-2019.

Africa represents only 2% of the $3.1 trillion global M&A market due to regional economic uncertainties. South Africa leads African M&A activity, followed by Egypt and Nigeria.

Benefits of M&A for Startups

• Enabling competition against large market players
• Facilitating both organic and inorganic growth
• Increasing capital bases
• Creating economic efficiency and reducing inflation
• Providing synergy and access to intangible assets like human and customer capital

More African startups should consider mergers and acquisitions, seeing their effects on business outcomes and on the economy.