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