Scaling smart: How mid-sized companies can leverage M&A for strategic growth

For mid-sized companies in Nigeria, survival and growth in today’s competitive market require more than organic expansion. While traditional growth strategies—such as increasing sales, expanding product lines, or entering new markets—are effective, they can be slow, capital-intensive, and vulnerable to economic fluctuations. Mergers and acquisitions (M&A) present a faster, more strategic pathway for mid-sized enterprises to achieve scale, enhance competitiveness, and unlock new opportunities.

Despite M&A’s potential, many mid-sized Nigerian businesses hesitate, perceiving it as a strategy reserved for large corporations. Yet, across Africa, successful M&A transactions in fintech, e-commerce, and manufacturing illustrate its transformative impact. By pooling resources, sharing expertise, and achieving economies of scale, mid-sized firms can accelerate growth and compete more effectively.

The case for M&A in Nigeria’s mid-sized sector

Nigeria’s economy, with its 200 million population and growing middle class, presents vast opportunities. However, mid-sized companies face hurdles, including limited access to capital, operational inefficiencies, and stiff competition. M&A provides solutions by facilitating market entry, expanding product portfolios, and fostering innovation.

Recent success stories in Nigeria and Africa

Jumia and Konga: Jumia’s acquisition of Konga enhanced its logistics and market presence, offering a model for mid-sized companies.

Interswitch and eClat Healthcare: Interswitch’s stake in eClat expanded its digital health footprint while providing eClat access to capital and networks.

Flutterwave and Disha: Flutterwave’s acquisition of Disha strengthened its fintech offerings and boosted Disha’s scalability.

Rite Foods and Bigi Water: Rite Foods’ acquisition of a water production plant improved local manufacturing and reduced costs.

Access Bank and Diamond Bank: Though a large-scale merger, it illustrates the benefits of market consolidation and expanded customer reach.

Tech and Fintech Deals: Recent acquisitions, including DriveMe’s purchase of a valet services provider and FairMoney’s acquisition of PayForce, highlight M&A’s role in scaling businesses.

These examples showcase M&A’s ability to enhance operational capacity, diversify revenue streams, and strengthen market positioning.

Read also: Nigeria can improve governance, accountability with M&E, says Perm Sec

Why M&A makes sense for mid-sized companies

Access to New Markets: Acquiring a company with an established presence accelerates market entry.

Diversification: Expanding product and service offerings mitigates risk and boosts revenue.

Economies of Scale: M&A reduces costs through shared resources and bulk purchasing.

Innovation and Expertise: Combining complementary strengths fosters product development and competitiveness.

Increased Investment Appeal: M&A positions companies attractively for funding and future growth.

Mitigating challenges in M&A

1. Due diligence

Challenge: Unexamined financial liabilities and operational inefficiencies. Solution: Assemble a due diligence team, engage auditors, and assess legal, financial, and operational risks thoroughly.

2. Regulatory compliance

Challenge: Delays from regulatory bodies like the FCCPC and SEC. Solution: Engage legal advisors early, conduct compliance assessments, and maintain transparency with regulators.

3. Integration planning

Challenge: Mismatched cultures and operational inefficiencies. Solution: Develop an integration roadmap, establish a dedicated team, and prioritise quick wins to ensure smooth transitions.

4. Financial constraints

Challenge: Limited access to capital for acquisitions. Solution: Explore private equity, structured payment models, and strategic partnerships.

5. Leadership and workforce retention

Challenge: Post-merger uncertainty affecting employee morale and retention. Solution: Implement transparent communication, competitive incentives, and team-building initiatives.

Conclusion

Mid-sized companies in Nigeria must embrace M&A as a strategic tool for growth. The success stories of Flutterwave, Interswitch, and others prove that well-executed deals unlock opportunities, drive efficiency, and create market leaders. As Nigeria’s economy evolves, businesses that capitalise on M&A will be best positioned to thrive in an increasingly competitive landscape.

Mobola Akinkugbe is a seasoned legal professional, life coach, business mentor, and a passionate advocate for purposeful living. She’s a partner at AO2 LAW with more than a decade of experience within the corporate and commercial sectors. Mobola hones practical experience in dispute resolution, with a unique perspective on solving complex legal problems and business challenges for sustainable success.