For years now, mergers and acquisitions (M&A) have gained popularity in Africa. In fact, many African start-ups have come to see them as an exit strategy or as a way of consolidating their positions and expanding. Even though start-up M&As are becoming the norm in Africa, they took a hit in the first half of 2023, declining to levels last seen in 2019.
According to Africa The Big Deal, start-up deals database, the number of start-up M&A in Africa in H1 2023 stood at 16 as compared to 41 in the same period in 2021 and 40 in 2022. The last time the number of start-up M&As were so low was in 2019 where there were only 13. The first quarter of the year saw the most decline with only seven M&A deals taking place in the African startup ecosystem. The delas in the first quarter were worth about Sh100.68 billion ($710 million).
For example, in January 2023, Tunisian artificial intelligence startup, InstaDeep was acquired by BioNTech, a German-based biotech company, for Sh96.42 billion ($680 million). This acquisition led to 240 highly skilled professionals joining the BioNTech’s workforce, including teams in AI, ML, bioengineering, data science, and software development.
Additionally in March, African unicorn, Andela acquired Qualified, a leading technical skills assessment platform to identify, qualify, and certify top engineers. Blockfinex, a UAE-based crypto exchange, also acquired a 100% stake in Fluidcoins, a Nigerian crypto payment gateway in an undisclosed deal after the latter was unable to raise additional funding.
The decline in African start-up M&A deals has followed the same trend as global M&A deals. In the first half of 2023, global M&A deals continued to decline as in 2022 after hitting a new high in 2021 in the last decade. With completed deals valued at Sh184.34 trillion ($1.3 trillion) in the first half of 2023, it was the second-lowest in the last 10 years; as only H1 2013 and H1 2020 were lower each recording Sh155.98 trillion ($1.1 trillion). in the first half of 2021, the M&A deals were valued at Sh368.68 trillion ($2.6 trillion).
Despite the low numbers experienced in the H1 2023, M&A activity is expected to see a rise in the second half of the year. In fact, according to the Bic Africa report, 2023, an increase in M&As activity on the continent is projected as African unicorns are expected to acquire more start-ups in their strategy to expand. With the likes of Flutterwave and Interswitch being unicorns, it is only a matter of time before they look to expand to reach their potential for growth.
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