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Unlocking Growth: M&A Opportunities in African VC Space

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mergers and acquisitions

By Philani Mzila

The past 12 months have seen a significant decline in venture capital (VC) funding in Africa. The total amount raised declined by almost 40% between July 2022 and June 2023 compared to the same period between 2021 and 2022. This sharp decline is particularly evident in the “Big Four” markets of Nigeria, Egypt, South Africa, and Kenya, with funding contracting by as much as 77% in some.

Due to these challenging market conditions, numerous startups are nearing the end of their financial runway and are struggling to secure further investment.

Founders in this situation usually face three paths:

  • Survival strategy: This entails major cutbacks and slower growth. This is only feasible for some startups.

  • Shutting down: This involves ending operations and returning any remaining funds to investors.

  • M&A route: Opting for a merger or acquisition.

Against this backdrop, mergers and acquisitions (M&A) may present a growing opportunity for African venture-backed startups. As many companies face a contraction in funding, M&A can offer well-provisioned startups a way to enhance their offering, expand their reach, and achieve greater scale.

Key drivers of M&A activity in VC

Several strategic and financial considerations power M&A within the startup ecosystem:

  • Technological or product enhancements: Businesses often use acquisitions to boost their technical prowess or enrich their product catalogue. By acquiring startups with innovative technologies or unique products, businesses enrich their product catalogue and elevate their technological capability. Strategically, this move provides companies with a twofold advantage. First, it accelerates the time-to-market for technology, sidestepping the lengthy and expensive in-house development process. Second, the acquisition grants companies a competitive edge by hopefully giving them rights to protected intellectual property. In essence, acquisitions serve as a strategic shortcut for businesses to improve their technological standing and product offerings, ensuring they remain ahead of the curve.

  • Talent acquisition: By acquiring a company primarily for its talent, more mature startups can access proven capability and teams that are experienced at building a startup. This immediate integration of a proficient team with pertinent skills ensures they can seamlessly transition into projects, potentially cutting down product or business launch timelines by months. Strategically, this not only grants the acquiring company access to scarce technical expertise but also provides insight into the invaluable knowledge held by these operators.

  • Expanding market share (locally and regionally): Horizontal integration allows startups to absorb competitors, amplifying the firm’s market presence and reach. Moreover, regional expansion through M&A allows startups to access new consumers, tap into local insights and leverage pre-existing distribution channels. On the other hand, through vertical integration, a startup can streamline its operations by acquiring control over its supply chain, including suppliers or distributors. Strategically, this crafts a holistic ecosystem of offerings with potential synergies and propels immediate growth in sales revenue and customer base, facilitating accelerated market penetration.

  • Opportunistic or distressed asset acquisitions: These acquisitions offer valuable assets at lower costs, equipping the acquiring company with strategic leverage. This is particularly beneficial with more asset-heavy type models.

Navigating the M&A landscape

Before diving into the M&A process, founders need to conduct a thorough market mapping exercise to identify potential targets that align with their strategic or financial objectives. This involves assessing the competitive landscape, understanding the target’s value proposition, and evaluating growth potential.

Founders should consider the following factors during market mapping:

  • Strategic fit and growth potential: A strong strategic fit ensures that the acquisition enhances the overall business and creates synergies. The growth trajectory and scalability of the target’s offering are also critical as they can enhance current growth by the acquirer.

  • Market positioning: A startup with a unique selling proposition and a strong market presence may provide a significant advantage to the acquiring company.

The art of due diligence

Performing due diligence (DD) is critical to any M&A deal. This comprehensive review of the target company helps the acquiring company identify potential risks and opportunities linked to the transaction.

Some of the key due diligence areas are:

  • Commercial DD: Founders should evaluate the target’s market position, customer base, and competitive advantage. Understand the target’s revenue streams and potential challenges in the market.

  • Product DD (including growth strategies): Founders should assess the target’s products or services, their uniqueness, and how they fit into the acquirer’s product portfolio. In addition, it is important to assess the target’s growth metrics, customer acquisition strategies, and potential for future growth. Ultimately the point is to understand the factors driving or impeding growth.

  • Legal and financial DD: Founders should review contracts, licences, intellectual property rights, and any legal issues that could impact the deal. In addition, it is critical to thoroughly examine the target’s financial statements, cash flow, profitability, and financial health, as well as identify any potential financial risks.

Structuring the deal

The deal structure plays a crucial role in M&A transactions. Founders should carefully consider how the deal is structured to ensure a successful outcome for both parties.

Common deal structures in the VC space include:

  • Cash and/or shares: The consideration for the acquisition can be in the form of cash, equity, or a combination of both. An all-cash acquisition may result in a misalignment of long-term interests between the parties, whereas an all-share offer may be a challenge to get over the line.

  • Upfront or earn-out: The payment can be made entirely upfront or partially upfront with deferred payments based on achieving certain milestones (earn-out). Earn-outs are particularly common when the target’s future performance is uncertain.

  • Management incentives post-deal: To ensure a smooth integration, management teams of the acquired company may be offered incentives to stay and continue driving growth.

Bridging cultures, valuing teams

Following the deal’s closure, the integration phase involves merging two entities and aligning processes, teams, and cultures. Careful attention to cultural alignment, talent retention, communication, and synergy realisation is paramount for the success of this endeavour.

M&A can breathe fresh life into startup ecosystem

The shifting landscape of African venture capital, marked by a decline in funding, necessitates a fresh look at the role of M&A. As more startups grapple with limited resources and financial uncertainty, M&A emerges as a viable path for growth, expansion, and innovation. Whether the motivation is talent acquisition, technological enhancement, or market expansion, these deals can breathe new life into companies and fortify their position in a competitive market.

However, the path to a successful merger or acquisition is intricate and multifaceted. It’s not just about the numbers or assets — it’s about people, cultures, visions and. For startups in Africa’s “Big Four” and beyond, embracing M&A could be the transformative move that paves the way for more sustainable businesses. But as with any significant venture, the key lies in strategy, diligence, and a clear understanding of the mutual value on offer.

Philani Mzila is the Investment Manager at Founders Factory Africa

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Building 234 Solutions: A Response to Everyday Workforce Challenges

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Owoloye Emmanuel 234 Solutions

By Owoloye Emmanuel

Every business starts with a problem. For us, that problem was hiding in plain sight.

Across organisations, we kept seeing HR professionals, payroll teams, and business leaders spend significant time navigating processes that should be simpler. Employee records sat across multiple systems, payroll processes required manual intervention, and routine workforce tasks often became more complicated than they needed to be.

As businesses grow, workforce operations naturally become more complex. Yet many organisations still rely on disconnected tools and workflows that create unnecessary friction for both employers and employees.

The consequence is more than operational inefficiency. HR teams spend valuable time managing systems instead of supporting people. Business leaders struggle to access timely workforce insights, while employees experience delays in processes that should be seamless.

These weren’t isolated challenges. They were recurring realities across workplaces, regardless of industry or size.

That observation led us to a simple question: what if workforce management could be easier?

What if HR, payroll, and workforce operations could work together within a single, connected experience?

That question became the foundation for 234 Solutions.

We are building 234 Solutions with a clear belief that workplace technology should reduce complexity, not add to it. Our goal is to help organisations spend less time navigating processes and more time focusing on productivity, growth, and people.

As we prepare for launch, our focus remains simple: building practical solutions for real workplace challenges and helping organisations create better experiences for the people who power them every day.

Owoloye Emmanuel is the founder of 234 Solutions

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The Role of TV in Preserving African Stories and Identity

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Preserving African Stories

Scroll through social media today, and you will notice something interesting: everyone is either reacting to a series, quoting a movie line, or debating a character as though they personally know them. Beneath the memes and binge-watch culture, however, lies something deeper. Television remains one of the most powerful tools shaping how Africans see themselves, remember their history, and tell their own stories. In a continent as diverse and expressive as Africa, that matters more than ever.

TV as a Cultural Archive, Not Just Entertainment

Long before streaming algorithms began shaping our viewing habits, television was already preserving African identity. From Nollywood dramas that capture the rhythm of everyday Lagos life to documentaries exploring Maasai traditions and Ghanaian folklore, TV has served as a living archive of the continent’s stories.

It preserves more than entertainment; it preserves language, culture, humour, values, and shared experiences. Unlike fleeting social media content, television allows stories to unfold with depth, exploring the realities of family, tradition, ambition, and modern African life without reducing them to stereotypes. That is the power of TV: preserving not just stories, but perspective.

Why Representation on TV Still Matters

There is a subtle but important truth: if people do not see themselves on screen, they may begin to believe their stories are not worth telling. This is why African TV content is more than entertainment; it is affirmation.

Seeing a character who speaks like you, struggles like you, or celebrates like your community does something powerful. It validates identity and challenges outdated narratives that have historically defined Africa through external lenses.

This is where MultiChoice Group, through platforms such as DStv and GOtv, plays an important role. They do not simply broadcast content; they help distribute cultural memory at scale.

GOtv, DStv, and the Everyday African Viewer

Think about a typical evening in many African homes: the TV is on in the background, someone is laughing at a comedy show, another person is watching a local series, and someone else is catching up on the news. That shared viewing experience remains very real.

Through platforms such as DStv and GOtv, African households are exposed to a blend of local storytelling and global content. More importantly, they have helped amplify African-produced content by bringing Nollywood films, African reality shows, talk shows, and documentaries into mainstream rotation.

It is not just about access. It is about visibility.

A young filmmaker in Lagos today is more likely to believe their story matters because they have seen similar stories broadcast widely. A child in Accra grows up hearing familiar accents and seeing environments that look like their own on screen, not as exceptions, but as the norm.

TV Is Also Shaping Modern African Identity

African identity is not static; it is evolving. Television reflects that evolution in real time.

Today, audiences see:

  • Young Africans balancing tradition and modern dating culture

  • Stories tackling mental health in African households

  • Fashion and music influences spreading through TV series

  • Political satire shaping public conversation

Conversations that were once confined to homes are now being explored on screen, giving audiences the language to discuss issues that were previously unspoken.

In many ways, television is doing what oral tradition has always done: passing stories, values, humour, warnings, and history from one generation to the next. The difference is that today’s griots are writers, directors, and broadcasters.

The Future: From Watching to Owning Our Narratives

The next stage of African storytelling is not just about being seen; it is about ownership.

As more African creators produce content and platforms continue to invest in regional storytelling, television becomes more than a mirror. It becomes a tool for shaping how Africa is represented to itself and to the world.

While streaming continues to grow, television, particularly accessible platforms such as GOtv, remains one of the most effective ways to reach everyday audiences across different income levels and regions. After all, storytelling only matters if people can access it.

African stories are not new. They have always existed in families, on streets, in markets, in history books, and through oral traditions. What television has done, and continues to do, is give those stories a stage wide enough for millions to experience them at once.

The next time you watch a local series or documentary on DStv or GOtv, remember that you are not just being entertained. You are participating in the preservation of African identity itself.

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The Future of AI in Nigerian SMEs: Overcoming Barriers to Implementation

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Kehinde Ogundare 2025

By Kehinde Ogundare

Ask a tech entrepreneur in San Francisco what AI means for their business, and they are likely to talk about competitive advantage, product differentiation, and scale. Ask a small business owner in Kano or Onitsha the same question, and the conversation shifts entirely.

For many Nigerian SMEs, the priority is keeping the lights on, managing costs, and finding sustainable ways to grow in a challenging economic environment. This difference in perspective explains why the global AI conversation, often shaped by assumptions about stable infrastructure, deep capital, and abundant technical talent, frequently fails to address the realities facing Nigerian SMEs.

This matters because Nigerian SMEs are not a peripheral concern. In 2024 alone, MSMEs contributed 46.32% to Nigeria’s GDP, accounting for 96.9% of businesses and 87.9% of employment. These businesses are the backbone of the Nigerian economy, and if AI is going to mean anything for Nigeria’s development, it has to work for them in the daily conditions they actually operate in.

However, research drawing on empirical data from 144 Nigerian SMEs found that inadequate infrastructure, low digital literacy, skills shortages, and regulatory gaps are collectively preventing them from meaningfully engaging with AI. Awareness of AI is high and growing. What is missing is a clear and honest conversation about what adoption actually requires in this specific context. The barriers are real, but none of them are insurmountable. The question is whether the tools, pricing models, and support structures being offered to Nigerian SMEs are designed with those barriers in mind, or whether they have been built for another market entirely.

Subscription models making AI affordable for small businesses

When most small business owners hear “AI,” they imagine expensive software, specialist consultants, and a hefty upfront bill.

That assumption is not entirely wrong, but it describes a particular way of buying technology, not AI itself. The shift that makes AI genuinely accessible at the SME level is the move away from large, one-time capital purchases towards tools that charge a predictable monthly subscription. Businesses can pay for what they use, scale back when necessary, and avoid the debt that a major technology investment can create.

The deeper opportunity here is consolidation. Many SMEs are already spending money across multiple disconnected tools—one for invoicing, another for customer records, another for stock tracking—none of which talk to each other. An integrated platform that handles several of these functions together, with AI built in, can actually cost less than the sum of those separate subscriptions while giving business owners a clearer picture of their operations.

With margins already under pressure, any technology a business adopts needs to visibly show an increase in productivity or bottom line. Subscription-based, integrated platforms, priced transparently and honestly, are the model that best fits this reality.

Infrastructure challenges demand a mobile-first approach

No conversation about technology in Nigeria is complete without confronting the infrastructure problem, and AI is no exception. Nigeria continues to face major infrastructure barriers, including limited broadband access, unreliable power supply, and high data costs, all of which constrain deeper AI adoption. These are structural features of the operating environment that any sensible technology strategy must account for today.

The electricity situation alone is significant. The World Bank estimates that the lack of stable electricity costs Nigeria’s economy approximately $26.2 billion annually, equivalent to about 2% of GDP, forcing many businesses to run on expensive diesel generators. That cost ripples outward.

In practical terms, AI tools built for Nigeria cannot assume a stable broadband connection or a computer that is always powered on. The tools that will actually get used are the ones that work on a smartphone, consume minimal data, and can function offline when connectivity drops, syncing back up when it returns. The mobile phone is already how many Nigerian SME owners run their businesses. AI that meets them there, rather than demanding infrastructure they do not have, is AI that has a genuine future in this market.

The direction is clear: build capability from within, using tools that make that possible. Recent AI performance research reveals that 64% of African workers are already actively using AI at work, signalling massive grassroots readiness and driving forward-thinking organisations across Nigeria, Kenya, and South Africa to aggressively prioritise internal upskilling frameworks to bridge the talent gap.

As the policy groundwork is being laid, the commercial ecosystem is beginning to respond. What remains is a clear-eyed acceptance that AI tools built for this market need to look different from those built for markets with different realities. Low cost, low bandwidth, and usability for non-technical people are not modest ambitions; they are the actual requirements. Build for those realities, and AI has a real future in Nigeria’s SME economy.

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