Why most cross-border deals in Africa don’t close the way founders expect

Author: Guy Addison, AC Corporate Transaction Services 

The last time Africa was riding high as a hotspot for global investment, I spent many of my evenings on the phone trying to calm an anxious client on the other side of the world.

I’d helped Jim sell his engineering business to an overseas consortium around 2006 when the commodities boom was roaring. A sharp entrepreneur, Jim saw it was a perfect time to sell. Like today, global sentiment was generally positive (save for Europe and the Middle-East), funding was plentiful, and many US and European companies were eager to gain a foothold in Africa’s growing economies.

Unfortunately, Jim was in a hurry. His family wanted to emigrate to New Zealand and to make the move he’d bought a small business in Auckland. It didn’t take long for Jim to start talking to a potential buyer. A group of investors from Europe liked what they saw and made him an offer. The price was lower than Jim expected but it was close. He signed.

There was a small upfront payment for the business but the bulk of the transaction was to follow once various conditions had been met. They included post-sale revenue milestones, new supplier agreements, management incentives, resolution of an outstanding arbitration, and clarification of tax commitments.

Such conditions are not unusual. But many of them could have been addressed before the sale.

And the loose ends were where the problems started to creep in.

Soon after signing the deal, Jim caught a plane to Australia to join his family who’d gone ahead of him. He needed to pick up the reins at the business in Sydney. Back in Africa, management and the new owners at the engineering company were left to resolve the outstanding conditions. What Jim thought would take a few weeks to finalize dragged into months.

That’s why Jim was bending my ear on the phone so often. He was trying to get to grips running his new business in a country that was proving to be more foreign than he imagined. His family were struggling to adapt to their new surrounds. And he desperately needed the money from the sale of the engineering company he founded.

Completing the transaction was slow and painful for everyone involved. Especially Jim.

Working with Jim reminded me of some important lessons.

1. First impressions frame the transaction. Close to 80% of the outcome a transaction is determined during a seller’s first contact with a buyer. If a buyer sees a seller who’s underprepared with unresolved tax, compliance, or governance exposure they’ll flag the deal as high risk. They’re likely to walk away. If they don’t, they’ll push down the price and load the deal with conditions.
2. Smart sellers understand the buyer’s needs. Background knowledge about a buyer’s objectives is always valuable for a seller. It allows sellers to address potential concerns upfront. When the buyer is coming from outside Africa, such understanding is critical. Common concerns are regulatory constraints, localisation requirements, and exchange controls. Sellers who anticipate and address such concerns, frame deal discussions around the value of the business rather than related risk.
3. Deal structure is as important as price. A well-prepared seller who has got their business in good shape and their sales strategy lined up before going to market can structure a transaction that has little complexity, few loose ends, and a limited number of conditions. These advantages will often allow them to conclude their sales quickly and at a good price.
4. Rushed deals rarely go smoothly. Africa didn’t invent time but it certainly owns the clock. Sellers should prepare international buyers for the delays, reviews and stakeholder consultations that often accompany transactions in Africa. Attempts to push deals through and handle the details later usually come unstuck. They can be detrimental to both seller and buyer.
5. Distance amplifies friction. The greater the distance between seller and buyer, the greater the likelihood of misunderstanding. Requests for information and clarification climb. Ideally, the seller should be close to the business before and after the sale so they can answer questions, provide information, and offer advice. Without clear communication between seller and buyer, deals can stall or turn sour after signing.

Jim’s sale was eventually concluded. He received his payout and the new owners were able to go ahead with their plans to expand the business. But the delays hurt Jim. He had to carry many of the costs the buyers incurred finalising the transaction. He also had to take out a loan in Australia to cover his operating expenses. What’s more, the stress of the delays knocked his health. It took him years to recover.

Handling Jim’s anxious international phone calls was difficult for both of us. Now that Africa is back in the sights of international investors, I’m looking forward to helping founders sell their business to buyers from abroad. But I’ll make sure they’ve done their preparation properly before we sit down with a potential investor.

Key takeaways

• Preparation is vital: If a seller has unresolved tax, compliance, or governance issues, buyers will walk away or load the sale with conditions.
• Think like a buyer: Keep negotiations focused on value rather than risk by addressed common concerns among international buyers about regulation, localisation, and exchange controls.
• Deal structure cuts risk: Address conditions upfront so the deal isn’t exposed to loose ends that could erode the purchase price.

Guy Addison is a corporate transaction specialist with over 20 years’ experience advising boards, shareholders, and investors on complex transactions across South Africa and emerging markets. With relevant experience on divestitures, carve‑outs and shareholder transitions, particularly in situations requiring careful structuring, governance discipline, and operational continuity. AC Corporate Transaction Services (ACCTS) is a specialist corporate finance and transaction advisory firm serving investors, boards and management teams across South Africa and broader African markets.