Acquisitions increase in Africa after investment stagnation

Acquisitions have become far more frequent in Africa’s tech ecosystem, and 2022 has already surpassed the number of acquisitions in 2021.

The findings regarding acquisitions in Africa come from a new report from Africa-based digital economy consultancy TechCabal Insights. According to the report, 32 acquisition deals took place across Africa in 2021. By the end of Q3 2022, there had been around 43 acquisition deals on the continent.

The consultancy suggests that this data indicates a consolidation trend for Africa and that the market is “maturing”.

Venture capital investment had seen continuous growth in Africa over the past two years, followed by a flattening in the investment amount. Due to this trend, some African startups have had to cut costs to increase the number of months before the funds run out. This has led to acquisition agreements becoming necessary for the survival of such companies, especially when it comes to startups operating in the same market.

The number of acquisitions between startups operating in the same market increased from 31 percent in Q2 2022 to 52 percent in Q3 2022.

Olanrewaju Odunowo, head of TechCabal Insights, gave his take on the report. Odunowo commented: “When it comes to Africa’s evolving technology ecosystem, appropriate context and nuances need to be taken into account.

“Data without context is unbalanced and misleading and can lead to wrong outcomes. In addition to crunching the numbers, we’ve gathered robust insights gleaned from primary interviews with leading industry experts.

“Our goal with this report is to present easily digestible insights and data points that everyone from founders to investors will find valuable.”

Tougher times ahead for African startups?

TechCabal’s report suggests that despite a positive trend in investment growth, the story has not always been bright for African startups. Between 2015 and 2021, investments in African startups grew 18 times. Investment in Africa also grew twice as fast as global prices between 2020 and 2021.

Grant increase aside, it also seems that life has not been normal for startups in the region. TechCabal describes how by the end of H1 2022, African-focused private equity investors had made 22 full exits. The statistics represent an increase of 29 per cent in exits compared to the number made in the first half of 2021 (15).

Of 35 startups that reached out to TechCabal, 37 percent were in fintech. The statistics highlight the fact that fintech remains the fastest growing sector in Africa.