High borrowing costs threaten Africa’s mergers and acquisitions

Mergers and acquisitions across Africa are facing significant headwinds due to high borrowing costs and a scarcity of flexible financing options, according to Standard Chartered. Despite a strong corporate appetite for expansion, the continent risks missing a crucial phase of industrial growth unless financial institutions adapt their funding strategies.

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The appetite for growth remains strong among African businesses. What is missing are financing instruments that reflect the realities of how African companies expand.

Dalu Ajene, Standard Chartered's Africa Chief Executive Officer, highlighted this concern at a strategic roundtable in Kigali, Rwanda. He noted that Africa's M&A activity declined even as global dealmaking recovered. Data from BCG's 2025 M&A Report indicates a 24% drop in Africa's total deal value in the first nine months of 2025 compared to the previous year, with transactions involving African companies decreasing by nearly 46%. This contrasts sharply with a global deal value increase of around 10% during the same period.

Ajene emphasized that the slowdown stems from a financing gap, not a lack of business ambition. African companies are eager to scale, acquire competitors, and deepen regional integration, but the financial architecture to support these ambitions remains underdeveloped. Many local banks still rely on rigid traditional lending structures that don't align with the uneven growth patterns of mid-sized firms. Furthermore, financing tools like mezzanine finance, hybrid debt-equity structures, and earn-out mechanisms are limited in many African markets.

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Many firms are ready to scale, acquire competitors, or deepen regional integration, but the financial architecture to support those ambitions remains underdeveloped.

This financing challenge persists even as Africa's appeal to investors grows, with foreign direct investment reaching a record $97 billion in 2024. Ajene called for a strategic rethink of acquisition financing, advocating for more flexible and scalable funding solutions to unlock the continent's next phase of corporate growth. He stressed the importance of these structures, especially as offshore private capital becomes more selective, local institutional capital remains shallow, and elevated interest rates make traditional acquisition debt more expensive.

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Such structures are particularly important in a market where offshore private capital has become more selective, local institutional capital remains relatively shallow, and elevated interest rates have made traditional acquisition debt more expensive for mid-market companies.