Exiting a startup is the moment investors and founders convert sweat, risk and time into cash (or strategic advantage). In Nigeria — where the tech and startup scene is maturing rapidly — exits are becoming more common, but they require careful planning because of legal, regulatory, macroeconomic and market-liquidity realities unique to the country. This article walks you through the main exit routes, real Nigerian examples, the legal and tax issues to watch, steps to prepare your company for exit, and practical recommendations for founders and investors.

1. The main exit routes (what they are and when they make sense)

1.1 Trade sale / strategic acquisition

A trade sale (selling the whole company or a controlling stake to another business) is the most common and fastest way for many Nigerian startups to exit. Strategic buyers buy to access customers, tech, talent or distribution. High-profile examples include Paystack — acquired by Stripe — which remains the benchmark for a successful Nigerian tech acquisition. TechCrunchStripe

When it makes sense: the acquirer gets clear strategic synergies and the startup’s product/market fit is attractive to incumbents or regional players.

1.2 Secondary sale (sale of shares to another investor)

This is when existing investors sell their shares to new investors (another VC, PE firm or financial buyer). Secondary transactions can provide liquidity without changing the company’s operations and are common when founders or early backers want partial liquidity but the company is not yet ready for a full trade sale or IPO. Private equity and secondary sales are frequently used in Nigeria. Financier WorldwideMondaq

When it makes sense: there are interested institutional buyers and the company has demonstrable growth but founders prefer to retain control.

1.3 Initial Public Offering (IPO)

IPO = listing shares on a public exchange (Nigerian Exchange — NGX — or foreign markets such as NYSE or LSE). Jumia’s NYSE IPO and other listings have shown IPOs can be transformational, though post-IPO performance may be volatile. More Nigerian startups are considering local listings as the NGX develops, and stakeholders are talking about a pickup in domestic IPO interest. MediumWeeTracker

When it makes sense: the company has scale, strong governance, predictable cash flows, and a readiness for public reporting and scrutiny.

1.4 Management buyout (MBO) and founder buyback

Management (or founders) raise funds (often with PE support or debt) to buy out investors. This preserves independence but requires the management team to secure substantial capital and often accept leverage. Useful when the management team is confident in future growth but investors want to exit.

When it makes sense: management wants control; investors agree to sell at a negotiated valuation and debt markets are accessible.

1.5 Earn-outs, staged exits and structured deals

Buyers and sellers often use earn-outs (payments contingent on future performance), staged share sales, or put/call arrangements to bridge valuation gaps. These help align incentives during transition but complicate accounting and carry legal enforcement needs.

When it makes sense: buyer and seller disagree on forward projections but both want a deal.

1.6 Liquidation (last resort)

If the business cannot be sold or turned around, liquidation returns whatever value remains to creditors and shareholders. This is the least preferred outcome but remains a possible exit for distressed startups.

2. What makes Nigeria different — regulatory & practical nuances

1. Regulatory filings and approvals. Exits involving foreign buyers/foreign investors often trigger filings and approvals (Corporate Affairs Commission (CAC), Nigerian Investment Promotion Commission (NIPC), and sometimes the Securities & Exchange Commission (SEC) where public market rules apply). Secondary sales and cross-border transactions may require additional notifications and compliance. MondaqLexology
2. Market liquidity and IPO readiness. Local public markets are growing, but domestic IPO appetite varies by sector and macro conditions. Many exits in Nigeria (and Africa generally) still happen via trade sales and private secondary transactions rather than local IPOs. SemaforWeeTracker
3. Tax and foreign exchange considerations. Nigeria’s tax regime, stamp duties, capital gains (or analogous taxation), and FX controls (where repatriation matters) can affect net proceeds. Good structuring is essential to reduce leakage and avoid surprises.
4. Buyer concentration and strategic acquirers. Many exits come from regional or global strategic acquirers (e.g., Stripe buying Paystack). This means startups often need to think beyond local buyers when planning exits. Stripe

3. Legal and governance issues to get right before exit

• Clean corporate housekeeping: up-to-date CAC filings, accurate minute books, valid shareholder registers, properly executed board resolutions. Buyers and auditors will insist on a clean record. mocaccountants.com
• Cap table clarity and shareholder agreements: Ensure share classes, vesting, options, pre-emption rights, drag/ tag provisions and conversion mechanics are documented and workable for the planned exit.
• Contracts and IP assignment: Ensure employment contracts, IP assignments (especially for tech startups), supplier/customer contracts, and NDAs are in place and assignable. Missing IP assignments are a common deal blocker.
• Regulatory compliance: industry-specific licenses (e.g., fintech, telecom) must be current and transferable where required. Engage regulatory counsel early. aocsolicitors.com.ng
• Tax due diligence: unresolved tax liabilities, VAT, PAYE, or customs issues can materially reduce transaction proceeds. Obtain tax clearance where possible.

4. Valuation and deal structures common in Nigeria

• Upfront cash + deferred/earn-out: To close valuation gaps while protecting buyers, deals often include an upfront payment plus earn-outs tied to revenue, EBITDA, user growth or retention.
• Share swaps and strategic equity: Some strategic buyers use share issuance or equity rollover for continuity.
• Secondary-only transactions: Investors sell to new investors while the company continues to operate independently.
• Lock-ups, escrow and indemnities: Sellers may have funds placed in escrow to cover breaches of warranties; indemnity caps and time limits matter and are negotiated aggressively.

(For private equity and VC exits, trade sales and secondary sales are historically most common; IPOs remain viable for a handful of scale businesses.) Financier WorldwideMondaq

5. Practical step-by-step exit preparation checklist

1. Start early (12–24 months before target exit). Clean financials, audited accounts (3 years where possible), and reliable KPIs make the process smoother.
2. Fix the cap table and governance issues. Resolve ambiguous shareholdings, expired option grants, and unapproved share issuances.
3. Do a mock due diligence (vendor due diligence). Engage advisors to run legal, tax and commercial DD — fix gaps before buyers find them. Bulls Capital Ltd
4. Get audited financials and strong unit economics. Investors and buyers expect audited statements (or at minimum reviewed statements) and defensible growth metrics.
5. Consolidate contracts & IP. Centralise evidence of IP ownership, client contracts, supplier terms, and ensure key person protections.
6. Model taxes and repatriation scenarios. Work with tax counsel to estimate net proceeds after local taxes, stamp duties and any repatriation constraints.
7. Prepare management for integration. For trade sales, buyers will evaluate management’s willingness to stay; prepare retention packages and integration plans.
8. Plan communications. Coordinate internal (team) and external (customers, partners, regulators) messaging to preserve value.
9. Select advisors wisely. Experienced M&A lawyers and investment bankers (or M&A advisors with Nigerian market experience) are critical.

6. Risks & common exit pitfalls

• Valuation gaps and unrealistic expectations. Over-optimistic founder expectations can stall deals. Benchmark to comparable deals (sector, stage, region).
• Regulatory hurdles and delays. Foreign investment approvals, sectoral licenses or antitrust concerns can lengthen timelines. Mondaq
• Macroeconomic shocks and FX volatility. Exchange controls or currency devaluation can affect repatriation and perceived value.
• Poor documentation found in due diligence. This can lead to price reductions, extensive indemnities or deal collapse.
• Post-deal integration risk. Cultural mismatch or product overlap can destroy expected synergies.

7. Practical recommendations for founders & investors

• Plan exits as part of fundraising conversations. Investors will ask for exit scenarios; be prepared to show plausible buyer lists, IPO readiness milestones, or secondary market options. Mondaq
• Keep financial reporting audit-ready. Start with clean, IFRS-aligned books early; audits take time and credibility matters to buyers.
• Think regionally and globally. Many strategic acquirers are regional/global—position your product for cross-border relevance. Paystack-Stripe is a classic example. TechCrunch
• Negotiate shareholder agreements with exit mechanics in mind. Build clarity around drag-along, tag-along and pre-emption rights to reduce last-minute friction.
• Use secondary rounds to provide early liquidity. If a full exit isn’t viable, structured secondary sales can de-risk investor positions while preserving growth. Financier Worldwide
• Engage reputable local counsel and tax advisors. Nigerian law and regulatory practice shape deal structure; local expertise speeds approvals and avoids surprises. LexologyMondaq

8. A few real-world signals from the market (what recent trends show)

• Significant strategic acquisitions (e.g., Paystack → Stripe) signal that global players are willing to acquire Nigerian startups when there’s strategic fit. TechCrunchStripe
• Private equity and secondary sales are gaining traction as some investors seek liquidity without full corporate control transfers. Financier Worldwide
• There is renewed conversation about local IPOs on the NGX as some larger Nigerian startups and stakeholders explore domestic listings — but IPOs require scale, governance and public-market readiness. WeeTrackerSemafor

9. Quick exit checklist (one-page summary)

• 12–24 months before exit: start vendor due diligence; hire M&A counsel.
• 6–12 months: get audited accounts; fix cap table; resolve tax and IP issues.
• 3–6 months: populate data room; prepare management presentations; list buyers.
• Deal phase: negotiate SPA, escrow, indemnity caps, earn-outs and closing conditions.
• Closing: ensure regulatory filings, tax clearances and repatriation plans are executed.

10. Conclusion

Exiting a Nigerian startup is achievable and increasingly common, but it is neither accidental nor quick. The market shows that trade sales and secondary transactions dominate today, while IPOs remain for a smaller set of mature businesses. Success depends on early planning, disciplined governance, clean financials, realistic valuations, and skilled legal and tax advice. Founders who treat exit readiness as part of their growth plan — not an afterthought — stand the best chance of converting effort into a rewarding outcome.