Standard Chartered Africa boss urges rethink of acquisition finance to revive M&A activity

As Mergers and Acquisitions (M&A) activity across Africa continues to lag behind a recovering global market, Dalu Ajene, CEO and head of coverage for Africa at Standard Chartered, has called for a fundamental rethink of acquisition finance, warning that the continent could miss a crucial phase of industrial growth without more flexible funding structures.

Speaking at a roundtable on “Scaling Acquisition Finance to Steady the M&A Downturn” at a pan-African forum in Kigali, Rwanda, Ajene said the continent’s weak dealmaking environment reflects a shortage of suitable financing solutions rather than a lack of corporate appetite for expansion.

According to a discussion paper presented by the CEO at the event, Africa’s M&A market has underperformed despite signs of a global recovery in deal activity. Data from BCG’s 2025 M&A Report showed that Africa’s total deal value declined by about 24 percent in the first nine months of 2025 compared with the same period in 2024, while transactions involving African targets fell by nearly 46 percent.

In contrast, global deal value increased by roughly 10 percent over the same period.

Another data from DealMakers Africa showed that M&A deal value across Africa, excluding South Africa, dropped 16 percent year-on-year to $4.66 billion in the first half of 2025, while deal volumes declined by 21 percent.

“The appetite for growth remains strong among African businesses,” Ajene said. “What is missing are financing instruments that reflect the realities of how African companies expand. Many firms are ready to scale, acquire competitors or deepen regional integration, but the financial architecture to support those ambitions remains underdeveloped.”

Flexible capital structures needed to support expansion

Ajene noted that most African banks continue to rely heavily on conventional lending structures with rigid repayment schedules that often do not align with the uneven growth trajectories of mid-sized businesses.

As a result, financing options such as mezzanine finance, hybrid debt-equity structures and earn-out mechanisms remain underdeveloped across many African markets, limiting companies’ ability to pursue acquisitions and consolidation opportunities.

According to UN Trade and Development (UNCTAD), Foreign Direct Investment flows into Africa surged by 75 percent to a record $97 billion in 2024. However, much of the increase was concentrated in large project-finance transactions, while greenfield investment announcements fell 37 percent to $113 billion.

Ajene said the divergence highlights the need for financing structures capable of converting investor interest into executable corporate transactions.

He argued that acquisition finance should evolve from a niche product reserved for large corporations into a scalable asset class capable of supporting Africa’s next generation of corporate champions.

“Africa’s M&A slowdown is fundamentally a financing problem, not a demand problem,” Ajene said. “There are viable businesses, willing buyers and strategic opportunities across sectors. The challenge is that too many good transactions fail to proceed because the right financing structures are unavailable.”

He also called for deeper collaboration between commercial banks and development finance institutions (DFIs) to improve risk-sharing and expand access to acquisition finance.

Under such arrangements, commercial banks would provide senior debt, DFIs would support subordinated financing layers, while guarantee mechanisms could help crowd in additional lenders.

He said these structures are particularly important at a time when offshore private capital has become more selective, local institutional capital remains relatively shallow, and elevated interest rates have increased borrowing costs for mid-market companies.

According to Ajene, a more collaborative financing model would reduce concentration risks for lenders while giving African firms access to longer-tenure capital better suited for expansion and consolidation.

Beyond capital availability, he stressed the need for clearer qualification frameworks to help businesses understand what lenders consider “M&A-ready.”

“Many African companies have strong potential but lack visibility into the requirements lenders expect around governance, cash-flow predictability and operational resilience,” he said. “By standardising assessment frameworks and increasing transparency, banks and DFIs can significantly expand the pool of eligible borrowers.”

The CEO concluded that reversing Africa’s M&A downturn will require not only more capital but also smarter deployment of capital through financing structures tailored to the realities of African business growth.