29 Dec



Companies may desire to restructure[1] or increase shareholder base and generally rearrange business for increased efficiency and profitability.

MERGER is the fusion of two or more corporate entities into one… largely on equal terms. While; ACQUISITION is the purchase by one company of all or a substantial interest of another company.

The Investment and Securities Act (ISA) regulates mergers and acquisitions[2]. From Section 119 ISA a merger can be seen as an amalgamation of two or more businesses[3]

A takeover is defined in Section 117 as  … the acquisition by one company of sufficient shares in another company to give the acquiring company control over that other company..

Section 119(2) provides; A merger contemplated in subsection (1) of this Section may be achieved in any manner, including through- (a) purchase or lease of the shares, interest or assets of the other company in question; or (b) amalgamation or other combination with the other company in question

Under Section 119(2)(b) the merger may be by:

  • Vertical merger: where two businesses in different lines/industry merge. E.g. Fishery company with transport company.
  • Horizontal merger: where two companies in the same line of business amalgamate.
  • Conglomerate Merger: this is just a combination of businesses that are so diverse.

Artificial transactions may be refused by SEC. Moreover, such merger should not create anti-trust or monopoly. I.e. it should not push other people in the industry out.


  1. To comply with government policy: e.g. in 2005, the CBN directed that banks must have at least 25 billion naira. Some banks (like unity bank) merged to meet up.
  2. Safeguards economic interest: e.g. a processing co may merge with the supply co.
  3. Sustainability and acquisition of experts: by merging, the company is likely to inherit highly skilled and competent managers.
  4. Increased market share: They become bigger in the market. But if such merger would result in a monopoly, it may be rejected by SEC.
  5. Risk diversification and expansion: e.g. a company based in Lagos can merge with a co based in United States thereby expanding its tentacles.
  6. Increase of profit and averting business failure: A successful application of the above would result in an economies of scale which would result in higher profit for the co.


  1. Certain offices/officer may become redundant and the employees would be laid off/retrenched.
  2. In vertical mergers, there may be duplication and over-capacity. This usually leads to retrenchment.
  3. Clash of cultures which affect performance. People from the old and new company may not really fuse. Everybody is usually clannish… forming cliques and all. E.g. year 2 fusion of UTME with Diploma.
  4. The success of the new entity is not secured.


In Re Lipton Nigeria Ltd, the court held that each of the companies giving or receiving in a merger are making an arrangement pursuant to the relevant sections under the Companies Act and each of the two company’s shareholders should be consulted and their consent obtained in the manner laid out in the Act. Moreover, that the court must satisfy itself that the class of members of the company summoned to the meeting were fairly represented by those who attended. That at least ¾ of those present in the meeting of both shareholders and creditor of the merging companies approved the scheme.

On procedure, see also In the Matter of John Holt Investment Ltd Scheme of Arrangement FHC/L/MS/80.

The approval of the Securities Exchange Commission is required for certain categories of mergers[4]. Section 120 ISA 2007 enables the SEC to prescribe amount for small merger, intermediate and large merger these are the three thresholds.

  • Small Mergers: where the amount concerned is below one billion naira. SMs do not need the approval of SEC-Section 122. Rule 421 SEC Rules
  • Intermediate merger: 1bn-5bn.
  • Large merger: 5bn and above.

In determining whether or not to approve a merger, the SEC is to consider the desirability of such merger, public interest, anti-trust issues, the need to prevent monopoly[5], and so on-Section 121 ISA, 423 SEC Rules 2013.

There are other industry specific statutes which require additional approval of certain requisite bodies. E.g. Banks need the additional approval of the CBN (See Section 7 BOFIA), Telecoms needs additional approval of NCC (See Section 45 NCCAct Insurance companies would need additional approval from NAICOM (see Section 30 Insurance Act.

Section 122. Section 125 and 126 (for Small, Intermediate and Large Mergers) provide that the SEC should respond within the requisite time (20 days or additional days not exceeding 40 days). Section 122(6) then provides that: If the merger is approved by the Commission, the parties shall apply to the court for the merger to be sanctioned and when so sanctioned, the same shall become binding on the companies…

Once the court sanctions the arrangement, the merger becomes complete. On further reading of Section 122(6), we would realise that the rights and Liabilities of the previous companies is then transferred to the new entity in such way as the court deems fit and proper to make the merger reasonable-Commercial Bank (Credit Lyonnais Nig. Ltd.) V Rose Okoli.

The court with jurisdiction in mergers is the Federal High Court-Section 251(e) CFRN, Afolabi V Western Steel Works Ltd[6].

Having noted the procedure, there appears to be an issue thrown up by Section 538 of the CAMA (concerning Arrangement on sale of company’s property during members’ voluntary winding up) which allows an arrangement similar to a merger. The question is whether parties can evade the obligations (like prior notification and approval by the SEC) imposed by ISA by basing their agreement under Section 538 of CAMA.  This question is solved by Section 118 ISA which provides; Notwithstanding anything to the contrary contained in any other enactment, every merger, acquisition or business combination between or among companies shall be subject to the prior review and approval of the Commission. Same point is also maintained in HC Rule 423 and 424.


The emerging company takes over the assets, rights, duties and liabilities of the scheme. The legal personality of the merging companies are transformed into the new emerging company. Note that a document showing merger may be required to prove the merger in court-Afolabi V Western Steel Works Ltd 2012 17 NWLR page 303.


In addition to the principles discussed earlier note the following for Acquisition.

:: Merger looks at fusing more than one company while Acquisition looks at one company taking control of another company.

:: SEC also regulates Acquisitions and takes certain things into consideration like effect of acquisition, future plan, treatment of dissenting holder, etc where necessary.

:: Both companies (Board and Members) should have passed a resolution authorising such endeavour. Then both companies should present the resolutions with Certificates of Incorporation, CTC of MEMO and Article, Annual Reports and account of both, CAC Form 07 (Particulars of Directors), then application (50k) and processing fee. SEC then considers the application.


[1] I.e. change the organisation structure of the co. Departments may be merged, scrapped,

[2] It was formerly the CAMA that regulated.

[3] A similar definition is provided in Blacks Law Dictionary.

[4] initially when the CAMA used to regulate mergers and acquisition. However, with the enactment of 1999 CAMA, part 9/10 relating to mergers and acquisition has been put under the ISAct. When the CAMA used to govern, there was no discrimination into threshold.

[5] There is currently a bill at the NASS for a bill on the Competitions Commission which would be a government agency saddled with the responsibility of ensuring that there is no monopoly or anti-trust. These already exist in some other jurisdictions like the US. Federal Competitions and Consumer Credit Bill Nigeria.

[6] 2012 17 NWLR page 303.


Quite eccentric really

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