Closer collaboration between banks and fintech companies is a positive development and has the biggest potential to drive financial inclusion in Africa.
Photo: In March, FairMoney acquired PayForce to expand its market offering
“Mergers and acquisitions (M&As) will significantly expand as unicorns like Chipper and Flutterwave will buy smaller companies to increase their market share. This will be a great trend because more M&A means there are exit opportunities for investors,” Zachariah George, Managing Partner at Launch Africa Ventures told thecondia.com last month.
In the same month, news broke that Moniepoint may acquire Payday, a Rwandan fintech company. This was two days after Payday announced its seed round led by Moniepoint. Although both parties denied the $40 million acquisition, the conversations reportedly started during the fintech’s seed fundraising cycle.
Apart from the rumoured Payday acquisition, Flutterwave also had an acquisition rumour in January. According to reports, Flutterwave planned to buy UK fintech, Railsr; the African unicorn also declined to comment on the rumour.
However, about seven acquisitions took place in the African tech ecosystem in Q1 2023, according to BD Funding Tracker, namely:
Instadeep’s mega acquisition
Early in January, German-based biotech company, BioNTech acquired InstaDeep for $680 million. The transaction involves an upfront payment of cash and unspecified BioNTech shares worth £362 million, and a balance of £200 million payable based on InstaDeep’s future performance.
In 2022, the German company that manufactured Pfizer’s COVID-19 vaccine—participated in InstaDeep’s $100 million Series B round which was led by Alpha Intelligence Capital and CDIB.
With the acquihire, InstaDeep increased the company’s workforce to about 240, with teams in AI, ML, bioengineering, data science, and software development. BioNTech also said it will grow its network of global research collaborators in the field and expand its footprint in key talent hubs across the United States, Europe, Africa and the Middle East.
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InstaDeep was founded by Karim Beguir and Zohra Slim in 2014. The Tunisian startup, headquartered in London with offices in Paris, Tunis, Lagos, Dubai and Cape Town, uses advanced machine learning techniques to bring AI to applications within an enterprise environment.
The acquisition builds on a successful track record of increasing collaboration between the two companies since 2019: In November 2020, the companies announced a multi-year strategic collaboration and joint AI Innovation Lab to apply for the latest advances in AI and ML technology to develop novel medicines for a range of cancers and infectious diseases.
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DriveMe’s 100% stake in Go!TwentySix
In January, DriveMe, a Nigerian mobility startup acquired a 100% stake in Go!TwentySix, a Lagos-based provider of valet services.
“Acquiring Go!TwentySix is one step to refining and deepening our service offerings in the mobility tech sector. Our customers will be able to access free valet services as they move across cities or visit critical places for business, leisure, shopping, and occasions,” Damilola Odunalde-Akeju, the Founder/CEO, DriveMe, said.
With the acquisition, Go!TwentySix will provide vehicle owners access to reserve parking spots and also book valet parking in their favourite hotels, restaurants, and pubs across the country through the DriveMe platform.
Share swap, otherwise called stock-for-stock, refers to a deal wherein the ownership of the shares in the target company (Galactech) is converted into the ownership of the shares in the acquiring company (GBarena) as per a predefined swap ratio.
This implies that GBarena is buying Galactech with a portion of its stocks.
Founded in 2015 by Samer Wagdy and Mustafa Zaza, GBarena prides itself as the pioneering e-sport platform in the MENA region, with a mission to connect all e-sport stakeholders in MENA and the entire world. “This acquisition is one step forward towards achieving the company’s vision, which is to be the leading aggregator in MENA, serving all stakeholders in the industry,” said Wagdy, CEO of GBarena.
Valued at $45 million, GBarena has nearly 700,000 users across 27 countries, with a presence in Saudi Arabia, Egypt and the UAE.
Andela acquired Qualified
African unicorn, Andela acquired Qualified, a technical skills assessment platform, for an undisclosed figure in March. The acquisition corroborated the company’s plan to embark on M&As following the close of a $200 million Series E led by Softbank in 2021.
“With the Qualified acquisition, Andela expands and accelerates our ability to source and expertly assess talent,” Jeremy Johnson, founder and CEO of Andela, said in a statement shared with Benjamindada.com. “Labour marketplaces are constrained by inefficiencies between supply, demand and quality —Qualified allows us to address those inefficiencies by providing the certified right talent at the right time. Companies will continue to trust that talent sourced through Andela has the needed skills regardless of where they live and work.”
Andela’s global talent community will also expand with the addition of more than 3.6 million engineering users via Codewars, an online community that enables technical talent to compete and improve their practical coding skills in gamified challenges. Codewars is powered by Qualified.
A pioneer Nigerian crypto acquisition
UAE-based crypto exchange, Blockfinex has acquired a 100% stake in Fluidcoins Nigerian crypto payment gateway in an undisclosed deal. This follows the Nigeria-based company’s inability to raise additional funding.
The undisclosed deal is an acqui-hiring—this means that the founding team of Fluidcoins will still work on the product. “There will be no management or staff changes,” Danny Oyekan, the founder and CEO of Blockfinex, said.
With this acquisition, Oyekan said that Blockfinex will use Fluidcoins Wallet-as-a-service product to reach more than 600 cryptocurrencies and will also expand Fluidcoins Checkout businesses to serve more businesses across.
This is arguably the first acquisition in the Nigerian crypto ecosystem. The deal was facilitated by Dan Holdings Limited, a web3 ecosystem and venture fund, and the parent company of Blockfinex.
The intra-South African fintech acquisition
South African neobank Fin acquired Thuthukani, a Pretoria-based fintech startup for an undisclosed amount. Since the acquisition, Thuthukani’s incremental housing finance offering has been renamed to Fin Home Loans and integrated into Fin’s South African portfolio with a mandate to give middle to lower-income Fin customers access to affordable finance.
Fin which was launched in mid-2018 by Timothy Nuy and Tonderai Mutesva had started as Finclusion Group and gradually rebranded to Fin, following its funding round of $2 million in 2022.
Acquisition to rebuild Africa’s money story
Last month, retail-led microfinance bank, FairMoney expanded its merchant offerings via the acquisition of PayForce, a sub-brand of YC-backed CrowdForce in an undisclosed deal.
Perella Weinberg Partners served as a financial advisor to FairMoney and Renaissance Capital Africa served as a financial advisor to CrowdForce on this transaction, which is reportedly a cash-and-stock deal in the range of $15 million to $20 million.
“This acquisition revolves around the power of the ecosystem that we are building in Nigeria and Africa as a whole. We started FairMoney as a lender, but we realized that as we grew, the demand and desire of the people we serve were more than just lending, but a more robust platform that will help them tackle all their Financial needs. It became clear to us that the counterparty for our regular users are merchants and small business owners,” Laurin Hainy, Co-founder and CEO of FairMoney, said in a statement.
In 2021, Fairmoney secured a $42 million Series B raise to diversify its offerings and expand to “become the financial hub for its users”. Meanwhile, CrowdForce raised $3.6 million pre-series-A to increase access to cash for rural communities in Nigeria in 2022.
Should M&As be counted as funding events?
Last week, we released the State of VC funding report for Q1 2023. According to BD Funding Tracker, funding for African tech startups plunged by 36.8% compared to the same period last year.
Since the report was released, I have received questions regarding our methodology and why we do not include M&As in our count. While we are currently working to organise a round table discussion with experts on this subject, I asked ChatGPT what it thinks about counting M&As as funding rounds.
It said:
Mergers and Acquisitions (M&As) are typically not considered as funding events because they do not involve the direct infusion of capital into a company.
In an M&A, one company acquires another company, typically by buying a controlling stake or all of its assets, and the shareholders of the acquired company receive compensation, which may include cash, stocks, or a combination of both. The acquired company is then either integrated into the acquiring company or operates as a subsidiary.
On the other hand, funding events, such as seed funding, angel investments, venture capital investments, and initial public offerings (IPOs), involve the direct infusion of capital into a company in exchange for equity or ownership in the company.
While M&As can result in significant financial gains for the shareholders of the acquired company, they are not considered funding events in the traditional sense because they do not involve the direct infusion of capital into the company being acquired.
