Over the last quarter, the trend of multi-million dollar acquisitions and IPOs have continued to make headlines across the African tech ecosystems.
Last week, Twitter broke over the announcement of Stripe’s acquisition of Nigerian start-up Paystack. The $200M deal has sparked up conversations about what is possible and what is seemingly inevitable for the African start-up ecosystem. To keep the conversation going, we decided to take a look at a few of African companies (from three major markets in Sub-Saharan Africa) that have closed exceptional deals lately.
Kenya — DPO Group
DPO started in 2006, as just a Payment Service Provider for a Kenyan Airline. However, DPO’s CEO — Eran Feinstein had bigger plans. He saw an opportunity to provide a valuable service while anticipating the growth and development of digital commerce across the continent.
One of the company’s core strengths is its ability to create innovative solutions unique to African markets. Their localised approach and presence in multiple countries put them in a unique position to solve considerable problems faced by large enterprises when it comes to scaling operations in Africa. For example, they were able to help multinational companies — Uber and KFC streamline their collection and Payments process.
In 2016, DPO raised a significant amount from Apis Partners, a London-based financial services investor to expand operations across Africa. Apis Partners shared their vision listing Africa as one of the fastest-growing and most under-penetrated markets for online payments in the world. Since then, DPO has gone on to acquire five additional companies and have transitioned into a truly Pan-African company with a 40% growth in revenue YOY from 2017–2019.
The COVID-19 pandemic did not slow the company down as DPO experienced an 87% spike in business account registrations. In March, they partnered with Mastercard to launch the DPO store to help SMEs cope with the economic impact of Covid-19. This move saw an increase in transaction value of 57% in May and 49% in June.
For Network International, this acquisition is a way to boost its operations in Africa — a strategy that has started seeing more action since the year began. It also serves as a validation of the maturity of the African-focused Startup ecosystem after years of investment.
South Africa — We buy Cars
In 2001, Webuycars, an online platform for selling second-hand cars was founded by two South African brothers. The platform features an inventory management system that produces real-time data on buying and selling of cars which allows for more effective valuations and faster decision making.
However, Webuycars was not always a digital-first company. When the company began to expand its operations, they realised they required increasing digitalisation. In November of 2018, the company partnered with Fledge Capital, a South African based investment firm. Fledge Capital brought both technical and business expertise on how to scale the business, and on mergers and acquisitions.
Over time, the company has now sold 40% of the business to Fledge Capital. Today, they are South Africa’s largest second-hand car dealer trading roughly 6,000 cars monthly. A major strength, their model. The Webuycars data centric operating model uses e-commerce and physical infrastructure, bolstered by a national footprint across Seven locations and over 18 buying pods in South Africa. Their pricing model is determined using artificial intelligence and not by buyer sentiment. Allowing proper cost management for their clientbase, as both buyers and sellers are ensured of a fair price and an immediate cash settlement.
The success of the company and a 31% dip in new car sales in SA could be what has made investors so bullish about WeBuyCars future. On their end, the decision to sell 49.9% non controlling shares to Transaction Capital was in part due to Transaction Capital’s ‘entrepreneurial mindset’. However in closing this remarkable deal, Webuycars becomes an example and exceptional addition in a much larger conversation of the promise of the continent’s startups — one that has largely been dominated by FinTechs.
Nigeria — Paystack
The idea was simple; an easy way for businesses to receive payments in less time. This simple idea has now grown into a Nigerian household name, serving over 60,000 customers and doing about 10 billion Naira monthly in transactions as of October 2018.
Like Stripe, Paystack focuses on seamless integration into apps and websites, making it easy for businesses to accept payments. Like DPO, their products are ‘localised’, providing alternate payment options such as Bank transfers and Mobile money.
They recently moved into the e-commerce space with the launch of Paystack Commerce, a set of tools that help SMEs sell online, as a response to the problems most SMEs faced in the wake of the pandemic. These user-centered substitutes allow them to reach beyond the banked and the tech-savvy to the under and the un-banked.
In 2018 they raised $8M in Series A round to expand to other countries around Africa, starting in Ghana. Payment giant, Stripe led this round of funding, allowing the company to continue a philosophy of building for Africans. This acquisition is an extension of that relationship and of Stripe’s plan to build out its operations in Africa.
Whether you are a serial entrepreneur working on another groundbreaking idea or a first-timer just finding your way through, one big existential question you must have asked is: where do I get investment? From partial to full acquisitions, from Kenya to Nigeria. We have highlighted record-breaking deals from across the continent, collectively valued at over half a billion dollars.
These deals follow a trend of global companies using acquisitions to gain a foothold in Africa. They also signal a promise of what is to come — a future that is undoubtedly African.
Cliff Note: At Oui capital, we work tirelessly to answer that big existential question. So if you are an entrepreneur looking to raise a seed round or an Investor wanting to learn more about the ecosystem. Say hello to us at Hello@ouicapital.com. We don’t bite…unless you want us to