Flutterwave’s Aboyeji reveals why businesses need unfair advantage amid low M&A deals

The co-founder of Flutterwave, Iyinoluwa Aboyeji, said tech startups in Nigeria and Africa should consider inorganic growth method, such as merger and acquisition, to scale in their competitive market.

According to the businessman – who had led two unicorn tech ventures in Nigeria, Andela and Flutterwave – sometimes, unfair advantage is required for a business to bolster its market valuation, and this is what M&A provides.

Aboyeji opined this in a series of tweets posted on his Twitter page on Saturday, stating that a startup will not always conquer a market where corporations exist, like the story of David killing Goliath.

“One thing I hope startup founders are educating themselves about is M&A. Valuations are pretty high and you may not be worth that much on paper but you can grow into that lofty valuation by acquiring startups who are well on their way to where you need to go to earn your val,” Aboyeji tweeted.

In his view, acquiring certain assets could be helpful during sluggish market period, “There are lots of undervalued old economy assets you can pick up if you look carefully enough and they can be a bulwark for your valuation when markets inevitably slow down.

“It is a lot of work and it requires a lot of patience, discipline, and wisdom but you can pull it off,” Aboyeji, who now invests in startups through his investment firm, Future Africa, wrote.

Nigerian tech market is low on merger and acquisition

Merger and acquisition is not rampant in the Nigerian tech markets, with most preferring the organic growth route in their bid to become a unicorn or exit to a venture capital funds.

READ ALSO: Flutterwave acquires content creating platform, Disha

The notable M&A reported in the Nigerian tech space is the acquisition of peer-to-peer lending startup, Abeg, by Piggyvest, as well as retail-tech startup, Alerzo, acquiring Shago Payments, and tech-driven mobility firm, Treepz (formerly Plentywaka) buying out Ugandan bus company, Ugabus.

Paystack, one of Nigeria’s biggest payment startup, also got acquired, but by an international payment company, Stripe, which it was modeled after.

With the low records for M&A deals, Aboyeji urged other founders not to shy away from offers just to play hero. He said: “As for founders or institutions who are being approached with acquisition offers – just remember that David killing Goliath was a miracle. In real life, business requires every unfair advantage you can get. Don’t be a hero.”

Factors founders need to watch out for in M&A deals

Breaking down the M&A route startup founders should ride on, the investor mentioned looking out for firms with undervalued highly skilled talents that can’t be can’t easily poach, fixed assets (buildings, equipment), as well as existing cash flows, with emphasis on longterm.

“When you want to buy a company watch out to see if one of (the) three things is undervalued and then go for the kill.” Aboyeji advised, adding that, “Ofcourse there are other things like brand and licenses but I feel like those are typically overpriced or priced in,” he concluded.

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now