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The Legal and Regulatory Regimes for Mergers and Acquisition in Nigeria


1.0       Introduction

Mergers and acquisitions are important corporate tools available to companies to achieve a myriad of objectives globally, Nigeria is not an exception. However, the potential triggering of monopolistic or anti-competitive scenarios by some of these transactions requires a comprehensive and robust legal framework. This article explores what mergers and acquisitions are, the legal framework to regulate them in Nigeria, their types and the reasons companies embark on this complex endeavours.  

2.0       Definition/Meaning

A merger refers to any transaction that forms an economic unit from two or more previous ones. This can happen through absorption where one of the companies retains its identity for the newly formed entity or through a consolidation where a completely new identity emerges for the newly formed entity. A scheme of merger of companies contemplates a transfer of properties and liabilities of one or more companies to another, however, such transfer does not include rights and obligations which are not transferable such as contracts of personal service.[1]

On the other hand, an acquisition takes place when a company (usually a larger company) acquires all or substantial interest in another (a smaller) company. In such a situation, the ownership and management of the erstwhile independent enterprises are brought under the control of a single management. An acquisition can be full where 100% stake of the smaller company is acquired or partial where the acquired stake is above 50% but less than 100%.[2]

3.0       Types/Forms of Mergers

Mergers have been categorized based on certain characteristics of the merging companies such as the sector in which they operate and market size.[3] There are generally three (3) types of mergers, namely:

              I.            Horizontal Merger – where the merging companies are on the same market level, manufacturing similar products in the same geographic region.

           II.            Vertical Merger – where the merging companies occupy different levels of operation for the same product.

        III.            Conglomerate Merger – merger the merging companies are involved in unrelated businesses that are neither competitive nor customers or suppliers of each other. This form of merger is neither vertical nor horizontal and the aim is usually diversification.

4.0       Legal Framework for Mergers and Acquisition in Nigeria

The legal framework for the operation of mergers and acquisitions in Nigeria comprises of a series of important legislations and their respective operative arms which prospective participants in a merger and acquisition transaction have to comply and interact with. These laws and governmental agencies are:

1.      Investments and Securities Act (ISA)

Prior to January 2019 when the Federal Competition and Consumer Protection Act 2019 (FCCPA 2019) was enacted, the Investments and Securities Act with the Securities and Exchange Commission (SEC) as its operative arm used to occupy the most important role in mergers and acquisitions transactions with Sections 118 – 218 of the Act granting it mergers and acquisitions approval powers.[4] However, while their roles in the arena have been significantly reduced, they still remain relevant in the successful completion of mergers and acquisitions in Nigeria.

2. Federal Competition and Consumer Protection Act 2019 (FCCPA)

The Federal Competition and Consumer Protection Act came into force in January 2019. Section 3 of the Act repealed the Consumer Protection Council Act, dissolved the Consumer Protection Council and established the Federal Competition and Consumer Protection Commission as its regulatory agency. Part XII of the FCCPA consequently gave mergers and acquisitions approval powers to the FCCPC, divesting the Securities and Exchange Commission of regulatory powers it previously held especially as it concerns issues of lessening of competition or creation of a monopoly that a merger and acquisition transaction may trigger. Section 17 of the FCCPA further tasks the Commission with the statutory responsibility of promoting competition in Nigerian markets at all levels through elimination of monopolies, prohibition of abuse of dominant market position and penalizing other restrictive trade or business practices, to achieve these aims, the Commission scrutinizes proposed mergers and acquisitions deals to ensure none of these mandates are violated.

3.      Companies and Allied Matters Act (CAMA)

The Companies and Allied Matters Act (CAMA) and its operative arm, the Corporate Affairs Commission (CAC) both play certain roles in the mergers and acquisition process being the supreme legislation and regulatory body for companies in Nigeria. Specifically, Section 237 of CAMA set out the mergers and acquisitions procedures which require a series of registrations, filings and certifications of corporate resolutions, notices and documents by the merging companies that are to come from the Corporate Affairs Commission.[5] Sections 538 and 539 of CAMA also provide for arrangement on sale of company during members’ voluntary winding up and compromise with creditors and members respectively.

4.      Companies Income Tax Act

It is impossible for a merger or acquisition to take place in Nigeria without prior direction and clearance from the Federal Inland Revenue Service (FIRS) in respect of all taxes due and payable by the merging companies such as Capital Gains Tax (CGT), Companies Income Tax (CIT), Value Added Tax (VAT) and Stamp and Duties Act (SDA). The FIRS ensures compliance with all relevant and applicable tax laws before issuing its clearance to the merging companies.

5.      Rulebook of the Nigerian Stock Exchange / Nigerian Stock Exchange

Publicly listed companies aiming to engage in mergers and acquisitions have to comply with the Rulebook of the Nigerian Stock Exchange which requires that certain conditions be met by them when engaged in such deals. The Nigerian Stock Exchange under Rule 15.11 of its Rulebook for example, requires disclosure of any dealing that would impact on share value. Similarly, a requirement for the successful completion of the process of merging or acquiring is that publicly quoted shares be exchanged on the floor of the Nigerian Stock Exchange.

6.      Securities and Exchange Rules and Regulations 2013 (SERR)

The Securities and Exchange Rules and Regulations (SERR) were made by the Securities and Exchange Commission pursuant to Investment and Securities Act and contain numerous provisions regulating the mergers and acquisition process in Nigeria. One of such is the prescription of the upper and lower thresholds of mergers under Rule 427 of the SERR 2013.[6] While the responsibility of making similar rules now lies with the Federal Competition and Consumer Protection Commission, the FCCPC is yet to make any such rule and has stated that pending the emergence of such rules, the SERR remains applicable.

7.      Sector Specific Regulations and Regulators

In addition to the above laws and regulators, the merger and acquisition process is also regulated by laws and regulators specific to the sectors they operate in. Examples of these sector specific laws and regulators are:

       I.            Banks and Other Financial Institutions Act (BOFIA) / Central Bank of Nigeria (CBN) for the banking sector,[7] and

    II.            Nigerian Communications Act / Nigerian Communications Commission for the communications sector

5.0       Reasons for Mergers

Mergers and acquisitions are popular largely due to their perceived potential to help companies achieve a variety of aims and objectives depending on the current stage and situation of the company. Below are some of the reasons companies choose to undertake mergers and acquisitions:

       I.            Growth and development – mergers and acquisitions present companies with the opportunity to grow size almost immediately rather than waiting years to grow and develop organically. Konga’s merger with Yudala to form what is now considered the largest online mall in Africa is a good illustration of this.

    II.            Defensive reasons – companies experiencing difficult times or in a downward spiral and fearing that they may be unable to weather the coming storm might decide to come together as one with hopes that their newly combined size, experience, reach and capacity puts them in a position to survive coming challenges.

 III.            Synergy – companies come together to benefit from the synergies associated with economies of scale, acquisition and use of technology, enhanced access to financial resources and new markets and the availability of large pool of skilled personnel greater in value than the sum of the two parts of the company.[8] An example of this is the recent merger of Diamond Bank Plc with Access Bank Plc.

 IV.            Gaining entrance – foreign companies who wish to enter a new market often explore the option of merging or acquiring an already existing company in the new market to ease their entrance.[9] A good example of this is SAB Miller Plc’s acquisition of Pabod Breweries in Port Harcourt and Voltric Lagos.

    V.            Regulatory compliance – mergers and acquisitions also help companies meet regulatory requirements. The Nigerian banking sector mergers and acquisition of 2005-2006 which saw the amalgamation of First Bank of Nigeria Plc, MBC International Bank and FBN (Merchant Bankers) to become First Bank of Nigeria Plc and the merger of United Bank for Africa, Standard Trust Bank and Continental Trust Bank to become UBA Plc amongst others in a bid to meet the twenty-five billion naira (?25,000,000,000) minimum paid-up capital requirement set by the Central Bank of Nigeria is a good example of this.[10]

6.0       Conclusion

Nigeria is not a stranger to mergers and acquisitions, especially considering the numerous mergers witnessed in the banking sector between the year 2005-2006 and the recent trend of mergers and acquisitions in the technology innovation scene. The aim of mergers and acquisitions should not be anti-competitive or monopolistic. The huge effects that mergers and acquisitions have on companies involved means that it should not be rushed into – companies should ensure there exists no cultural or social conflict between them and their intended merging partner. Importantly, being a complex procedure, the assistance of qualified professionals should be sought to ensure ultimate compliance with relevant laws and procedures in order to achieve the desired goals. 


[1] See Noakes Vs. Doncaster Amalgamated Collierties Ltd (1940) 2 ALL ER 549.

[2] ‘Mergers and Acquisition: A guide to creating value for stakeholders’ – Hitt M.A., Harrison J.S. and Ireland R.D., New York, USA.

[3] ‘Mergers and Acquisitions: a new business tool for a new Nigerian business age’  accessed May 23, 2020.

[4] ‘The Mergers and Acquisitions Review – Lawrence Fubana Anga and Maranatha Abraham, Edition 13.  accessed May 23, 2020.

[5]Companies and Allied Matters Act, Cap C.20 LFN 2004.

[6] Securities and Exchange Commission Rules and Regulations 2013.

[7] For example, Section 5 of the Banks and Other Financial Institutions Act which requires the consent of the Central Bank Governor before a bank can enter into an agreement or arrangement for any form of restructuring.

[8] Supra, footnote 7.

[9] Supra, footnote 2.

[10] ‘The Effects of Mergers & Acquisitions on Corporate Growth and Profitability: Evidence from Nigeria’ – Sylvester Feyi Akinbuli and Ikechikwu Kelilume. Global Journal of Business Research, Vol. 7.

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