An Overview Of Mergers And Acquisitions In Nigeria

An Overview Of Mergers And Acquisitions In Nigeria

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Nigeria like every other serious-minded country has accepted and recognized mergers and acquisitions as viable tools in corporate restructuring. Most companies facing increased competitive business environment are constantly driven to improve their services and increase efficiency hence mergers and acquisitions have continued to remain very effective in achieving this end.

A common phenomenon that occurs during mergers and acquisitions is that, the companies rearrange or re-engineer their corporate structure. By way of amalgamation, they collapse their existing organs and transmute into a larger entity known to law. On the other hand, a Company may choose to purchase or acquire controlling shares in another. This concept is known as acquisition. Both concepts are quite similar except that in the case of merger, existing shareholders of both companies involved retain a shared interest in the new combined company.

Historical Background

Generally, Mergers and Acquisitions are ultimately utilized for economic gains. The very first cases of mergers were recorded between 1897 and 1904 in Europe and America. From time immemorial, mergers and acquisitions are largely influenced by economic factors. The macroeconomic environment, which includes the growth in GDP, interest rates and monetary policies play a key role in designing the process of mergers or acquisitions between companies or organizations.

Mergers & Acquisition Transactions In Nigeria

It is no gainsaying that in recent times, Nigeria has improved in embracing the viability of mergers and acquisitions in revamping their businesses or optimize the returns on investments. This laudable development is a clear departure from what used to be the convention in the past, in which the major actors in the amphitheatre of mergers and acquisitions were predominantly foreign-owned multinationals.

In Nigeria, the earliest case of mergers and acquisition include the 1912 acquisition of the Anglo African Bank established in 1899 by the then British Bank of West Africa established in 1892. These entities metamorphosed into today’s First Bank of Nigeria Plc. Since then, a lot of other companies have keyed in.

One of the most striking mergers and acquisitions that occurred in Nigeria’s private sector remains that of the banking sector in 2005. The Central Bank of Nigeria (CBN) had in 2004, embarked on a policy induced consolidation exercise to strengthen the banks and position them to play integral roles in economic development. The Central Bank had ordered banks to increase their shareholders’ fund, raising their capital base from Two Billion Naira (2,000,000,000) to minimum of Twenty-Five Billion Naira (25, 000,000,000). This policy prompted a significant reduction in the number of banks in Nigeria from eighty-nine in 2005 to twenty-five and later to twenty four in 2004. The decline was borne out of the inability of existing banks to meet up, financially, with the terms of the new policy. The apex bank’s policy triggered massive fusion of banks i.e. merger in the banking industry. Also the aggregate capital base of the sector rose from about US$3 billion to US$5.9 billion. This unprecedented feat is a testimony to the success being recorded by the global concept of mergers and acquisition. The end product in the banking sector that year produced today’s United Bank for Africa which was formerly Standard Trust Bank and United Bank for Africa and the then Bank PHB which formerly was Platinum Bank and Habib Bank.

Recent Developments In Mergers And Acquisitions Under The Fccpa

Prior to the enactment of the Federal Competition and Consumer Protection Act 2018 (“FCCPA”) mergers and acquisitions in Nigeria were generally regulated by the Investment and Securities Act 2007 (“ISA”) while the Securities and Exchange Commission were the regulatory authority. However, the FCCPA has now repealed sections 117-128 of the ISA which deals with mergers and acquisitions excluding 121 (i) (d). However, the regulatory authority that sanctions mergers in Nigeria is the Federal Competition and Consumer Protection Commission (“Commission”) and no longer SEC.

The FCCPA gives a comprehensive definition to mergers. It defines mergers as “when one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another undertaking.”[1] This definition is radically different from that provided for under the ISA. The focal point under ISA was the amalgamation of the undertaking which resulted in one entity replacing the undertakings that amalgamated. From this definition, one can infer that the FCCPA is more concerned with the direct or indirect control over the whole or business of another undertaking. The overall effect of this is that, the presence or absence of amalgamation of undertakings no longer serves as a deciding factor.

The Merger contemplated by the FCCPA can be achieved through any manner including through (i) Purchase or lease of the shares, interests or assets of the other undertaking in question; or (ii) amalgamation or other combination with the other undertaking in question; or (iii) a joint venture.[2] Under the ISA, it provides for three categories of mergers namely small, intermediate and large mergers. However, the FCCPA provides for just two categories of mergers namely small and large mergers. Also, it is pertinent to note that where a proposed merger is a small merger, notifying the FCCPC is not required and the implementation of the merger without approval is possible unless the FCCPC requires that it should be notified. In practical terms, the FCCPC may within six months after the implementation of a small merger require notification when it is of the opinion that the merger may substantially prevent or lessen competition. Further implementation of such merger should be put on hold until the merger is either conditionally or unconditionally approved by the FCCPC.[3]

The term “acquisition” was not defined by the Act but was defined in the Consolidated Securities and Exchange Commission Rules as

“…..the take-over by one company of sufficient shares in another company to give the

acquiring company control over that other company.’’

It is instructive to note that acquisition connotes a take-over. Thus, in commercial usage, the expression “acquisition” is properly used interchangeably to mean “take-over” as distinct from merger. It is therefore safe to say that a thin line exists between mergers and acquisitions. While, merger presupposes the joining of two entities to form one, with the other losing its identity, acquisition only allows one company to take-over controlling shares in another company to give the acquiring company control over the acquired company, with the target company still retaining its identity, however, as a subsidiary of the acquiring company. What constitutes “control” has been defined to include ownership of more than one half of the issued share capital of the company[4].


The enactment of the FCCPA is the right step in the right direction, the reason for this may not be far fetched as it allows the Securities and Exchange Commission to focus more on its primary duty as the capital market regulator in Nigeria while the FCCPC focuses mainly on issues bordering on competition and anti-trust in the Nigerian market.

It is quite laudable that Nigeria like other developed economies have fully recognized mergers and acquisitions as a veritable tool in economic development.

This Article was written by Donald Attah Esq. Donald is a Lawyer with several years of experience, his areas of practice include Energy, Power, Infrastructure, Corporate and Commercial Law. He is also the Project and Business Support Manager of the Legal Nuggets. He can be reached via email at

[1] Section 92 (1) (a) of FCCPA.
[2] Section 92 (1) (b) of FCCPA.
[3] Section 95 (1), (3) and (5) of the FFCPA.
[4] S.J Singh, Project Report on “Study on Merger and Acquisition in Banking Sector of India”








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