Nigerian fintech startup Risevest recently acquired digital trading platform Chaka, continuing the trend of mergers and acquisitions (M&A) in Africa’s fintech space. The deal was confirmed this week by both companies’ founders after months of discussions.
For Chaka, the acquisition provides a lifeline amid past regulatory troubles. Nigerian authorities banned the company in 2020 for lacking proper licensing, though Chaka later secured approval to resume operations. Risevest focuses on enabling dollar investments and has raised substantial funding itself.
According to Risevest’s founder, the Chaka team will remain intact despite the change in ownership. But the acquisition comes during a turbulent period for African fintech, roiled by controversies, closures, and layoffs.
Once-popular digital bank Eyowo shut down entirely due to ongoing difficulties, while crypto exchange Patricia grappled with a major security breach. Payments company Cellulant cut 20% of staff to shift strategy. Several other fintechs have slashed workforces or pursued sales.
Most prominently, Nigerian startup Payday entered acquisition talks just months after a $3 million funding round. While a proposed sale to Moniepoint fell through, Payday’s sudden shift underscores the uncertainty permeating African fintech.
Given the challenges, consolidation through M&A has become an attractive exit or survival strategy. The landmark sale of Paystack to Stripe in 2020 accelerated interest in startup mergers. Acquisitions span fintech, e-commerce, agtech, and more.
In the first quarter of 2023 alone, African startups saw 7 M&A deals worth over $710 million. Only two companies have managed public listings since 2019, demonstrating M&A’s dominance for exits.
Combining forces can help startups gain scale, access licenses, and withstand market volatility. For founders, selling may discover value faster than uncertain growth plans. As solutions converge across fintech, merging also integrates offerings.
Risevest and Chaka highlighted synergies in their investment products and crypto services. Other recent deals saw complementary startups join together in logistics, energy, and digital banking.
However, some question whether M&A mainly serves as damage control, signalling lost momentum or limited vision. Does it represent giving up independence to salvage some value? Or can mergers strategically jumpstart growth?
Proponents argue consolidation is often necessary for maturation after the hype of rapid, fragmented expansion. M&A draws on each party’s strengths more sustainably than going it alone.
Yet critical voices say reliance on mergers highlights imitation over innovation. For struggling startups, it may primarily serve investor interests over users. Finding the right partner is also challenging.
As African fintechs navigate market uncertainty, the Risevest-Chaka deal offers a prominent example of consolidation. Its outcome will indicate whether M&A presents a viable growth strategy or an exit route for beleaguered ventures.
Beyond the buyers and sellers, the wave of shakeups and realignment promises a reset for African fintech overall. While painful for many involved, the sector may emerge more mature and resilient. But its ultimate shape remains unfolding.