africa deals

Egypt and Nigeria are among the biggest M&A markets in Africa, amid explosive growth in digital financial services. John Everington reports.

After a slump in activity in the early days of the global pandemic, African deal-making roared back into life in 2021. Even as Africa continues to trail the rest of the world in terms of its Covid-19 vaccination programmes, renewed confidence in the global economy has reignited international investors’ interest in funding and acquisition opportunities across the continent, particularly within the fintech space.

The year saw several lenders from both inside and outside the continent acquiring existing banking assets in other markets, building on the expansionary trends witnessed in previous years. Yet 2021 was most notable for a series of eye-catching investments in digital financial service providers in the continent’s burgeoning fintech ecosystems — most notably South Africa, Egypt and Nigeria — as the global investment community increasingly looks to Africa as the future of fintech.

After a drop off in activity in 2020 amid Covid uncertainty, deal values on the continent hit a five-year high in 2021 according to data from Dealogic, even as the number of deals recorded during the year remains subdued following a drop-off in activity during the second half of the year (see figure).

The surge in deal values for the year was underpinned by a $46.1bn share-swap deal announced in May 2021 by South African tech investor Naspers with its Dutch-based investment unit Prosus — a move designed to reduce the impact of Naspers’s 29% holding in China’s Tencent on local financial markets.

High-profile fundraising

One of the biggest moves in the traditional banking landscape for 2021 was the continued unbundling of shares in Nedbank by its shareholder Old Mutual. In June, after reducing its majority stake in the lender to just 19.4% in 2018 as part of a managed separation process, Old Mutual announced the unbundling of a further 12.2% stake, or $734m worth of shares, to its shareholder base.

Perhaps more significant than the Nedbank unbundling was a series of high-profile fundraisings within the South Africa’s fintech sector, led by TymeBank, the country’s first cloud-based lender. TymeBank, which has amassed more than four million customers since launching services in 2019, announced a R1.6bn ($109m) funding round in February 2021 — one of the largest fundraisings ever for an African digital bank.

TymeBank, which has a business development and engineering hub in Vietnam and plans to offer banking services in the Philippines, announced a further $70m worth of new funding from investors including Tencent and CDC Group, the UK’s development finance institution, in December.

Tencent also led a $48m Series B fundraising for South African payments provider Ozow in November. The same month saw banking-as-a-service provider Jumo attract $120m in funding from investors including Visa and Fidelity Management & Research Company (the latter’s first investment in an African company), and the acquisition of cash management platform and merchant lending platform Connect Group by Net1, and electronic payment service (EPS) provider, for R3.7bn.

Growth and reforms

As one of the fastest growing economies in Africa during the past five years, Egypt is home to both a rapidly growing banking sector and a blossoming fintech community, prompted by a series of recent progressive banking reforms, including the awarding of banking licences to fintechs and the launch of a nationwide instant payment scheme. It comes as little surprise therefore that the country’s lenders and fintechs experienced some of the largest acquisition transactions and fundraising rounds on the continent last year.

“Egypt has cemented its position as a key market for regional expansion plans within the Middle East and north Africa region,” says Said Hanafi, a partner at MHR & Partners law firm in Cairo. “[The past year’s] strong rebound in M&A activity highlights the enduring appeal in the market, particularly within the fast-growing technology, media, and telecom and financial services sectors, with local and international buyers alike quick to seize opportunities as they search for post-pandemic growth.”

January 2021 saw the divestment of the Egyptian operations of Lebanese lenders Bank Audi and Blom Bank. The sales come following the collapse of Lebanon’s banking sector in 2019, following a devaluation of the country’s currency, in what the World Bank has described as one of the worst economic crises experienced by any country since the mid-19th century.

First Abu Dhabi Bank — the UAE’s largest lender — acquired Bank Audi’s Egyptian operations in a deal estimated to be around $600m, making it one of the largest international banks operating in Egypt. Blom Bank’s operations were acquired by Bahrain’s Bank ABC in a $425m deal.

Banque Misr, the country’s second-largest lender, increased its shareholding in local financial services group CI Capital Holding. The bank, which built up an initial stake of 24.7% in 2020 via a series of block trades, acquired an additional 65.3% shareholding through a mandatory tender offer on the Egyptian Stock Exchange in March 2021.

As in South Africa, the year saw several significant deals and financings within the fintech space, underlining the growth potential in Egypt, where around one in three adults remain unbanked, according to the latest data from the World Bank.

MNT-Halan, an EPS and buy now, pay later provider launched in 2017, secured $120m in investment in September 2021, with funders including Apis Partners, Middle East Venture Partners, Development Partners International and Lorax Capital Partners. Payments solutions provider Paymob raised $18.5m in Series A funding in April, led by Dubai-based VC Global Ventures.

This February, Egyptian digital investment platform Thndr announced a $20m Series A funding round co-led by Tiger Global, BECO Capital and Prosus Ventures.

Challenging the incumbents

The growth of Egypt’s fintech scene has not gone unnoticed by the country’s incumbent financial institutions. The country’s largest lender, National Bank of Egypt, acquired EPS provider Momken via its Al-Ahly Capital Holding subsidiary for an undisclosed sum in March 2021.

As Africa’s largest and most populous country, Nigeria remains perhaps the most important fintech ecosystem on the continent, with more than half of its 200 million population still unbanked. The country made headlines in late 2020 with Stripe’s acquisition of local payment services integrator Paystack for around $200m.

Local payments firm Flutterwave closed $170m worth of new financing in March 2021, valuing the company at over $1bn, with US investment firms Avenir Growth Capital and Tiger Global leading the Series C funding round. The firm has subsequently announced $250m worth of Series B funding from investors including B Capital Group, Alta Park Capital, and Whale Rock Capital, giving it a valuation of more than $3bn.

Fellow digital payments provider OPay joined the growing stable of Nigerian ‘unicorns’ (companies valued in excess of $1bn) in August, with a $400m round of financing — including SoftBank Vision Fund 2’s first African funding — valuing the company at $2bn.

In a move that symbolises the rise of new digital entrants at the expense of the country’s traditional banks, Titan Trust Bank, a largely digital lender that launched services in 2019, announced in December that it planned to acquire an 89.4% stake in beleaguered Union Bank of Nigeria, the country’s second-oldest bank and 10th-largest by assets, in a deal reported to be worth $293m. The transaction remains subject to approval by the Central Bank of Nigeria at time of writing.

Deal-making and fundraising activities in Africa in the past year were by no means confined to the continent’s main ecosystems. September saw the birth of francophone Africa’s first fintech unicorn, as Senegal-based mobile money provider Wave raised $200m in Series A funding — the largest funding round of its kind in Africa — with Stripe, Sequoia Heritage, Founders Fund and Ribbit Capital leading the way.

Meanwhile MFS Africa, a pan-African digital payments network, in November raised $100m in Series C funding, consisting of $70m in equity and $30m in debt. MFS itself acquired Nigerian mobile money agent network Baxi the previous month.


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