Corporate Restructuring; Merger and Acquisition



Restructuring is a corporate management action where a corporate entity seeks to improve its deteriorating financial fundamentals, poor earnings performance, bankruptcy, or excessive debt by making significant concessions to its capital structure or ownership to achieve its short-term and long-term goals. A company undertakes restructuring to modify the financial or operational aspect of its business, usually when faced with a financial crisis to achieve its current needs. As a result, depending on agreement by shareholders and creditors, a company may sell its assets, restructure its financial arrangements, and issue equity to reduce debt or file for bankruptcy as the business maintains operations.

The speed of business dynamics demands that business organizations not only revamp their internal business strategies like effective market expansion, increased customer base, product diversification, and innovation, etc., but also expect them to devise inorganic business strategies like Mergers, Acquisitions, Takeovers, etc., that results in a faster pace of growth, effective utilization of resources, and fulfilment of increasing expectations of stakeholders. These restructuring strategies work positively for the business both during times of business prosperity as well as recession.


Corporate restructuring as a business strategy is the process of substantially changing a company’s financial structure to address challenges and financial crises or to improve the business. The restructuring process may thus involve the company’s sale or a merger with another company. Companies use restructuring as a strategy to ensure their long-term viability and efficiency. Similarly, a firm or an entity must reorganize and concentrate on its competitive edge to expand or survive in a competitive climate. When the liabilities of a company are more than its assets, particularly its short-term financial obligations (liquidity shares), then there is a need to restructure or re-organize and this is known as Corporate Restructuring.

Also, a company can restructure its operations or structure by cutting costs. This process also helps the company to raise cash and reduce costs while also increasing efficiency and profitability. Corporate restructuring reorganizes a company’s operations and can either be Internal; involving the company alone, or External; involving another company.

Regulatory Bodies

  1. Corporate Affairs Commission.
  2. Federal Competition and Consumer Protection Commission.
  3. Securities and Exchange Commission.
  4. Federal High Court.

Regulatory Framework For Restructuring

  1. Companies and Allied Matters Act, 2020[1].
  2. Federal High Court Act.
  3. Investment and Securities Act.
  4. Federal Competition and Consumer Protection Act.

Reasons For Corporate Restructuring

  1. Apart from increasing profits, another reason behind a company going for restructuring is to make the company more competitive as compared to other peers in the industry.
  2. If a company is operating at below capacity, the company may go for restructuring to utilize the excess capacities.
  3. Another reason for corporate restructuring is when the company is into too many businesses or over-diversified; it may want to concentrate only on one business and corporate restructuring is the best way to solve that problem.


  • Internal restructuring.
  • External restructuring.


Internal restructuring occurs when consequential changes are made to a Company’s capital structure without liquidating the existing company. Specifically, it occurs when a Company has a large debt profile and the Company desires to retain its corporate identity without the involvement of any third party. It aims to free the company from losses and debts by negotiating with creditors and minimizing the volume owed to them to ensure a desirable position.

The methods of internal restructuring available to a Company include:

  • Arrangement and compromise.
  • Arrangement on sale.
  • Corporate buy-out.
  • Alteration of share capital.
  1. Arrangement And Compromise

An Arrangement is defined as any change in the rights or liabilities of members, debenture holders, or creditors of a company or any class of them[2]. On the other hand, Compromise may be defined as an arrangement that terminates a dispute. The scheme of Arrangement and Compromise must be fair and reasonable and must be sanctioned by the Federal High Court to become binding[3]. However, the sanction will not take effect until the corporation submits a Certified True Copy of the arrangement, or compromise to the Corporate Affairs Commission and annexes it to the company’s memorandum created after the Court has sanctioned the arrangement or compromise[4].

  1. Arrangement On Sale

This involves the members of the company in general meeting resolving by way of special resolution that the company be wound up and a liquidator be appointed and authorized to sell the whole or part of the company’s undertaking or assets to another corporate body in consideration for cash, fully paid shares or debentures in the transferee company which would be distributed in species amongst the members of the company per their rights in liquidation[5].

However, if a member pursues an action against a company’s winding up based on unfairly discriminatory and oppressive conduct, the arrangement on sale and distribution will not be enforceable unless the same is sanctioned by the Federal High Court.


External restructuring is a procedure in which a company’s financial affairs are wound up, and a new company is formed to take over the former company’s assets and liabilities after the financial position has been reorganized. It requires a lot of deliberations and approval, and is subject to authorization by the Federal High Court.[6]

External restructuring typically involves multiple companies redesigning the company’s critical components, such as ownership, management, liabilities, and assets. External reconstruction of a company involves forming a new company to take over the operations of a liquidated firm. The newly established company receives fresh share capital without any diminution in the share capital.

The methods of external restructuring available to a company include:

  • Merger.
  • Acquisition.
  • Take over.

A Merger means any amalgamation of the undertakings or any part of the undertakings or interests of two or more companies[7]. It occurs when one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another undertaking[8]. It includes any amalgamation of the undertakings or interests of two (2) or more companies[9].

A Solicitor plays a very important role in Merger. At an early stage, he takes part in the formulation of the business bargain to make sure it complies with all laws and regulations. He coordinates all necessary investigations and prepares all relevant documents. In particular:

  1. He draws up the Memorandum Of Understanding.
  2. He conducts the legal Due Diligence.
  3. He participates in the negotiation process.

By S.8 CAMA, 2020, the Corporate Affairs Commission is vested with the power of regulation and supervision of the formulation, incorporation, registration, management, and winding up of companies. Subsequently, the Federal Competition and Consumer Protection Commission (FCCPC) has the power to approve mergers. The essence of the power vested in FCCPC is to ensure that Mergers do not result in adverse effects on competition.


  1. Corporate Leverage to increase its debt-equity ratio.
  2. Expertise in management.
  3. Desire for growth and increased market value.
  4. To survive regulatory requirements for consolidation as was the case in the CBN 25 billion bank consolidation in 2005.


  1. Horizontal Merger: A Merger involving direct competitors in the same line of business. This type of merger gives rise to a monopoly as it eliminates competition[10].
  2. Vertical Merger: A combination of two or more companies that are engaged in complementary business activities.
  3. Conglomerate Merger: Fusion of two or more companies that engage in completely unrelated aspects of a business.

A notable Corporate restructuring can be traced to 2011 and effectively in 2012 when Access Bank took over the defunct Intercontinental Bank Plc. Although the integration was alleged to be riddled with controversies, as reports said over a thousand staff of Intercontinental Bank were laid off during the process, the Bank emerged stronger and bigger after the acquisition.

Tracing further, a more recent restructuring occurred on April 1, 2019, when Access Bank and Diamond Bank merged after signing a Memorandum of Agreement. This proposed Merger involved Access Bank acquiring the entire issued share capital of Diamond Bank, in exchange for a combination of cash and shares in Access Bank via a Scheme of mergers.


An Acquisition is the take-over by one company of sufficient shares in another company to give the acquiring company control over the other company[11]. The SEC is empowered to regulate acquisitions in both private companies and unquoted public companies through the filing and approval of the requirements for acquisitions by any corporate body or individual[12].

The acquiring company is expected to file a “LETTER OF INTENT”, and it is worthy of note that the filing shall be done by a Registered Capital Market Operator.


Take-over is an external restructuring process that involves the acquisition of a minimum of 30% and a maximum of 50% of the shares or voting rights of the target company, either by a core investor or the acquiring company to take over the target company[13]. However, before a company can be taken over, the acquiring company or core investor must obtain the authority to proceed with the take-over bid from SEC[14].


Following a restructuring, a company should be left with smoother, more economically sound business operations since corporate restructuring as a business strategy aims to increase efficiency, improve the market edge, and help maintain and enhance the positive value of a company. It is also pertinent to note that the essence of restructuring is to achieve a company’s financial performance, liquidity, and solvency goals, as a corporate entity that has been efficiently reformed is likely to be more efficient, organized, and focused on its primary business.

  1. Law of Federation of Nigeria (LFN), 2004
  2. S. 710 Companies and Allied Maters Act, 2020.
  3. S. 715 (2&3) CAMA 2020.
  4. S. 715 (4) CAMA 2020.
  5. S. 714 (1) CAMA 2020
  6. Accessed 22
  7. S. 119(1) CAMA, 2020.
  8. S. 92 Federal Competition and Consumer Protection Act, 2019.
  9. S. 119(1) Investment and Securities Act
  10. S. 421 Securities and Exchange Commission (SEC)
  11. Rule 421 SEC Rules
  12. Rule 434(a) SEC Rules
  13. S. 131(1) Investments and Securities Act (ISA)
  14. S. 134(1) ISA

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