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 in 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 a 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 OONFormerly ChairmanStanbic IBTC Bank Plc
Preface
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 and allows for deal and process innovations that spur new regulations. In dreaming up the shareholders 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 directives to all Nigerian banks to increase their shareholders’ fund to a minimum of NGN25 Billion (US$208 million), from NGN2 Billion.
In eighteen 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 guide-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 and Acquisitions 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 text book, so as to deal with the substansive law as well as give insights into the practice of M&A in Nigeria, deriving mainly from the investment and securities Act, 2007. 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 Ikenna Ajogwu, SAN, FCIArbLagosJanuary 11, 2011
Foreword
It is a pleasure to be asked to write the foreword to this important practice book on mergers and acquisitions. The book’s importance and usefulness lie in the way in which Mr. Fabian Ajogwu, SAN has selected a combination of practical texts and cases to present a comprehensive piece on the law and practice of mergers and acquisitions in Nigeria. Mergers and acquisitions (M&As) have no doubt become a veritable engine of economic growth. They are attractive because they create commercial synergies and economies of scale by expanding operations and markets, and contribute to eliminating inefficiencies and increase productivity and profitability of companies.
The author captures the usefulness of mergers as “vital tools used by companies for the purpose of expanding their business operations with objectives ranging from increasing their size, long-term profitability or relevance within a particular market."The introduction lays out the meaning of mergers and acquisitions and presents the history of mergers and acquisitions in Nigeria from AG Leventis and Leventis stores merger in 1983, to very recent ones, with the most striking m&a activities being in the banking and financial services sector consolidations that occurred from 2005. These mergers were largely driven by the Central Bank of Nigeria’s 2004 directives to increase the shareholders’ funds of banks to a minimum of N25 billion.
The author presents the law and practice of M&A 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. There is an attempt to critically evaluate some of the successful cases of mergers from the reasons and benefits of the merger, to the content of the scheme of merger, court-ordered meetings of merging entities, and the court sanction of the mergers. At whatever level the law and practice of mergers and acquisitions in nigeria is studied and reviewed, there can be no doubt regarding the value of Mr.
Ajogwu’s book in clarifying the mechanics, strategies and processes of mergers, the essence of due diligence, the impact of private equity, the strong question of valuation and other implications of M&A both from stakeholders and regulatory perspectives. 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 a good reference and compulsory reading. Mr Ajogwu’s book constitutes a bold initiative at stating the law and practice of M&A in Nigeria is the form of a practitioner’s book for the benefit of all who are interested in the subject.
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 OONChairmanStanbic IBTC Bank Plc
