The estimated value of the disclosed mergers and acquisitions (M&A) market in Africa was $1.12 billion in 2020, with fintech start-ups accounting for over nine-tenths of total M&A volumes.
This is according to the Africa Investment Report 2020, compiled by UK-headquartered research firm Briter Bridges, The research is compiled in collaboration with Africa’s investor community of over 70 funds, institutions and syndicates. It explores funding activity across the continent's tech and innovation scene.
Overall, investment activity recorded across Africa, including capital deployed (funding) and acquisition value, amounted to about $2.4 billion in 2020, notes Briter Bridges.
According to the report, Africa’s funding landscape was characterised by a handful of large deals of above $100 million, with the top 10 deals by size in 2020 accounting for over 50% of the $1.12 billion deployed into ventures across the continent (including disclosed and undisclosed deals), with over 30% of companies funded being incorporated in the US.
“As markets keep growing steadily, propelled by an increasing interest from investors, corporates, academia and public institutions, the diversity and energy which have been defining Africa’s innovative ecosystems throughout the 2010s seem to suggest that a gradual path to sophistication and maturity is laid ahead,” says Dario Giuliani, director of Briter Bridges.
African start-ups received over $1 billion again in 2020, after breaking the billion-dollar barrier in 2019, which reached $1.1 billion for the first time, a big jump from 2018's $669 million invested.
The report points out that COVID-19 resulted in fear due to the negative impact on several industries as well as the looming market uncertainty it triggered. As a result, forecasts anticipated significant slow-downs in investment activity across the continent.
However, the many conversations that Briter Bridges says it had throughout 2020 with private and institutional investors, highlighted that funding mandates and activities hardly ever ceased but, if ever, they were temporarily paused to allow investors to focus on existing portfolios or adjust due diligence procedures to ‘the new normal’.
Fintech attracts lion's share
Despite its steady growth over the past decade, investment activity remained significantly skewed towards a select few sectors and geographies. Fintech accounted for over nine-tenth of total M&A volumes, with high-profile acquisitions such as Paystack, DPO Group and Wave, and over a third of all non-acquisition funds deployed.
Aside from a promising, growing number of early-stage-focused venture capital funds and investors, support ecosystem organisations such as syndicates, venture builders and technology hubs have been increasingly deploying financial and in-kind resources into companies across the continent, states the report.
“While financial technology companies retain the lion's share of total funding, cleantech (22%) is increasingly attracting capital from local and international investors, including a growing number of corporates interested in fast-tracking their transition to renewable energy,” says Briter Bridges.
“Healthtech (9%), data and analytics (7%), agritech (7%) and e-commerce (5%) follow as more private companies reach maturity, but ticket sizes remain contained compared to those across fintech and cleantech.”
Meanwhile, a report compiled by start-up news and research portal Disrupt Africa notes 2020 was a record year for investment in the African tech start-up ecosystem, with more start-ups raising more funds than ever before.
According to the report, new funding records were set over the course of 2020, as 397 start-ups raised $701.5 million in total funding.
“Both these figures are up substantially on the previous year, with the number of funded start-ups increasing 27.7% from 2019, and the funding total growing by 42%. SA, Kenya, Nigeria and Egypt retained the highest share of total funding, accounting for 77% of funded start-ups and 89.2% of total investments,” according to Disrupt Africa.
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