Izin Akioya, marketing expert and global logistics leader, has said mergers and acquisitions (M&A) play a critical role in ensuring the long-term success of African startups.
Akioya disclosed this during a media chat in Lagos. She pointed out that while the continent’s entrepreneurial ecosystem is traditionally known for its resilience and creativity, incorporating M&A strategies could drive growth, help startups scale, and overcome existing barriers.
“While the continent’s entrepreneurial ecosystem has traditionally been characterised by resilience, ingenuity, and grassroots innovation, the incorporation of M&A strategies into this landscape will amplify growth and enable startups to overcome systemic challenges,” she said.
According to her, startup failure rates in Africa, as in other regions, are high. “About 70 – 90 percent of startups fail within the first 3 to 5 years, which is consistent with global statistics.
“In South Africa, a study by the Small Enterprise Development Agency (SEDA) revealed that about 70 percent of small businesses fail within the first year. In Nigeria, startups face high failure rates due to funding challenges, with some reports suggesting that only 20-30 percent survive beyond 3 years.”
Izin pointed out that limited access to funding is one of the key factors contributing to high startup failure rates in the region. Difficulty finding product-market fit due to diverse consumer needs, fragmented markets, and poor infrastructure, such as unreliable internet and electricity, compounds the issue.
She added, “Complex and inconsistent regulatory environments in some African countries create barriers to scaling, while limited access to just-in-time skilled talent, especially in tech and management roles, pose challenges for startups. Fluctuating currencies and economic challenges in some regions impact business sustainability.”
Furthermore, she said, “Despite the media buzz around a prevalence of incubators, programs, and funds targetting the sector, access to valuable mentorship and accelerator programs remains unequally distributed and highly contested.”
Izin noted that even with emerging hubs like Kenya and Egypt seeing increased startup success, mergers and acquisitions as a growth accelerator remain nascent.
“An M&A strategy can serve as a potential exit or growth opportunity when securing significant funding is challenging. By planning for M&A, founders can position their startups as attractive acquisition targets or partners for larger companies,” she stated.
By consolidating, startups can build more robust operations and enhance customer experiences. Mergers or acquisitions can help startups enter new markets by leveraging local companies’ existing infrastructure and networks. Acquiring smaller competitors or complementary businesses can help startups gain market share, technology, or talent, enhancing their value proposition.
M&A activity in Africa is still in its early stages and requires a nuanced approach that balances financial incentives with respect for local visions and leadership. Local entrepreneurs may hesitate to sell their companies, fearing loss of autonomy or mission dilution, while early adopters will need competent representation and legal, financial, and valuation advisory.
So, as Africa’s entrepreneurial environment continues to evolve, embracing mergers and acquisitions as a strategic lever could be the key to unlocking the continent’s full innovation potential.
“Albeit, the future of Africa’s startups lies not only in ingenuity but also in collaboration, and M&A is a powerful enabler of that vision”, she added.
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