Introduction
“The book presents the law and practice of mergers and acquisitions in Nigeria, followed by crucial issues such as legal and commercial setting of M&A , due diligence, preliminary documentation, the valuation question, tax aspects of M&A, implications on labour relations, and good references to successful mergers and acquisitions in Nigeria. This book constitutes a bold initiative at stating the law and practice of M&A in Nigeria in the form of a practitioner’s book for the benefit of all who are interested in the subject. For students of the subject it is a one-stop-shop, which sets M&A in its practical context. For practitioners, investment bankers, lawyers, executives, board members and policy-makers it should be good reference and compulsory reading. I must commend the Learned Senior Advocate for this pioneering step in writing this book, and therefore regard ‘Mergers and Acquisitions in Nigeria: Law and Practice’ as an authoritative text on the subject. I recommend the book to all practitioners and persons interested in Mergers and Acquisitions in Nigeria”. Mr Atedo Peterside OON, Former ChairmanStanbic IBTC Bank Plc
Preface
Mergers and Acquisitions continue to evolve as the complexities of trade and commerce evolve. As a crucial tool for expanding the operations of a company with a view to achieving long term growth, and increased revenue or profitability, the subject of mergers and acquisitions is no doubt an important one. The concept of mergers and acquisitions (M&A) only had minimal actual significance in Nigeria starting from the year 1982. This situation changed significantly after the Securities and Exchange Commission (SEC) began its operations in 1982, marking the beginning of regulated business combinations in Nigeria. Between 1982 and 1988, the SEC supervised thirteen mergers, including the mergers of Lever Brothers Nigeria and Lipton Nigeria, and John Holt and John Holt Investment.
The prospects of mergers and acquisitions in Nigeria have continued to evolve since then. M&A is an area that is as dynamic as the market itself, and allows for deal and process innovations that spur new regulations. In dreaming up the shareholder rights plan, or the poison pill, in 1982 to give boards of a target company a chance to "level the playing field" and have time to weigh offers, renowned M&A lawyer, Martin Lipton explained that they"... had reached a whole new plateau of hostile takeovers, and there was really very little in the way of defense to them". Lipton's innovation did not come into popular use until after the Delaware Supreme Court cleared the path with a 1985 decision.
Different legislation have been passed to regulate business combinations, including the Companies and Allied Matters Act of 1990 and the Investment and Securities Act of 2007, as well as some sector-specific Acts, such as the Banking and other Financial Institutions Act of 1991, the Insurance Act of 2003 and the Electric Power Sector Reform Act of 2005. In 2002, there was a merger of two important petroleum companies; Agip Nigeria Plc and Unipetrol Plc, to form Oando Plc. However, the most striking activities in M&A in Nigeria were undoubtedly the 2005 mergers that took place in the banking sector. These mergers were driven by the Central Bank of Nigeria's 2004 directive to all Nigerian banks to increase their shareholders' fund to a minimum of NGN25Billion (US$208 million), from NGN2Billion.
In twenty chapters, I have tried to look at the meaning of mergers and acquisitions, the commercial background of M&A, issues of due diligence, principal legal documentation, as well as tax considerations against the background of Nigerian laws. Issues of valuation, intellectual property rights, and employee relations are critically examined from a Nigerian law and practice perspective. Takeovers, and takeover bids, private equity arrangements and collective investment schemes are given in-depth considerations as would governance, corporate control & pursuit of profits, and protection of shareholders, and ends with useful Nigerian case studies, court forms and templates, which are intended to serve as a guiding-thread to the extensive literature on the transactional aspect of M&A.
Recent trends in M&A as well as the implications of the International Financial Reporting Standards (IFRS) on mergers and acquisitions have been discussed in this edition. In writing Mergers & Acquisition in Nigeria: Law & Practice, it was not my intention to provide a comparative survey of all elements of the subject. Rather my aim was to provide a practical guide on the law and practice of M&A starting from preliminary considerations through to the deal. There appeared to be a need for a source-book and practice-book, as opposed to a textbook, so as to deal with the substantive law as well as give insights into the practice of M&A in Nigeria, deriving mainly from the Investment and Securities Act, 2007 and related law and regulations. All of these have brought dept and meaning to this book on M&A in Nigeria.
This book lays no claim to perfection, and I therefore take full responsibility for any errors of omission or commission that may be found herein. Fabian Ajogwu, SAN, PhD (Law) (Aberdeen)Lagos, June, 2014
Foreword
The importance of merger to the Nigerian economy and the various sectors must be well known to most citizens now. Without doubt, it is the process that has given birth to stronger and better-run banks in Nigeria. It is also what has facilitated the emergence of companies in various sectors with more reliable financial foundations. It might therefore surprise some that there is a paucity of literature on this subject. The reason may not be easily known. Clearly, however, mergers and acquisitions are a difficult subject. It is therefore commendable that Dr Ajogwu has undertaken the arduous task of writing and faithfully updating the work. The first edition of this book has been a most important resource book for operators in the Nigerian capital market.
The reason for this is not hard to seek - until it was written, there was a dearth of material on this very important subject. There were no books that dealt with the subject of mergers and acquisitions comprehensively. Resort was had to Company law text books, which understandably could only afford brief discussions of the subject. Given that the first edition of this book covered the subject of mergers and acquisitions comprehensively, practitioners might conclude that a second edition would not be written after three years. However, this edition must have been necessitated by developments in the sector. Some more mergers have taken place in various industries and the Securities and Exchange Commission has issued the 2013 Regulations.
Similarly, the second edition of Dr Ajogwu's book, Mergers and Acquisitions in Nigeria: Law and Practice, has highlighted the role that the courts are playing in developing the law on the subject, particularly with the groundbreaking decision in Ojora v. Agip (Nig.) P/c. (2014) 1 NWLR (Pt. 1387) 150. It also traced the recent developments in accounting and financial reporting, and the financial reporting standards applicable to mergers and acquisitions. It is therefore doubtless that this edition is an improvement on the first edition, which is in itself a very good book, and I have no reluctance in recommending it to investors, shareholders, corporate managers, legal practitioners, capital market operators, other professionals and the general public. Mr.
Oscar OnyemaDirector-General and Chief Executive OfficerNigerian Stock ExchangeMay, 2014
