Mergers and Acquisitions: Legal Insights and Strategies for Successful Corporate Consolidation

CONTRIBUTOR: ANIMASAUN IYANUOLUWA

INTRODUCTION

Mergers and Acquisitions (M&As) have increasingly become strategic tools for corporate growth and sustainability in Nigeria’s evolving business landscape. As companies seek to scale operations, diversify portfolios, and maintain competitive advantage, attract foreign direct investment (FDI), and comply with regulatory policies, M&A transactions offer a viable pathway for achieving these objectives.^[1] This article explores the origin and rationale behind M&As in Nigeria, analyses key legal frameworks governing such transactions, outlines the procedural steps for successful implementation, and provides strategic insights for navigating Nigeria’s regulatory terrain. Through relevant case studies and an incisive legal analysis, it offers practical guidance for stakeholders involved in corporate consolidation.

MEANING OF MERGERS AND ACQUISITIONS IN NIGERIA

The Securities and Exchange Commission Rules on Mergers, Takeovers, and Acquisitions, 2021 defines a merger as ‘any amalgamation of the undertakings or any part of the undertakings or interest of two or more companies and one or more corporate bodies’. Section 148 of the new Investment and Securities Act, 2025, consolidates this definition by providing that:

merger means the acquisition or establishment, directly or indirectly, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, or by joint venture, of control over or significant interest in the whole or a part of a business of any other person

The foregoing definitions were judicially reiterated in the case of Mbu v. Stanbic I.B.T.C. Bank Plc. (2016) 12 NWLR (Pt. 774) 201.

The statutory frameworks mostly define only mergers, subsuming acquisitions under mergers, but some have argued that they mean different things. According to Emechebe, Ahaneku, and Okpalangwu, a merger, on the one hand, refers to the combination of two or more separate entities into one, resulting in the dissolution of at least one of the merging companies, while an acquisition involves one company taking over another and assuming control of its operations and assets.^[2]

1. Provenance and Rationale of Mergers and Acquisitions in Nigeria

The concept of mergers and acquisitions (M&A) in Nigeria can be traced back to the early 1980s, coinciding with the government’s increasing interest in promoting indigenous participation in the economy. The first recorded successful merger in Nigeria occurred in 1983 between A.G. Leventis & Company Limited and Leventis Stores Limited.^[3] This transaction marked the beginning of formal corporate consolidations in Nigeria, setting a precedent for future deals. Over time, M&As became more frequent, particularly in the banking and telecommunications sectors, driven largely by regulatory reforms,^[4] market liberalisation, and the global push towards economic efficiency and competitiveness.

1. Case Studies of M&A’s in Nigeria

Several high-profile M&A transactions in Nigeria underscore the significance and growing reliance on corporate consolidation. For example, the merger between Access Bank Plc. and Diamond Bank Plc. in 2019 created one of the largest banks in Africa by customer base.^[5] Recently, in August 2024, Unity Bank Plc and Providus Bank Limited merged, forming a formidable banking entity with combined assets of approximately ₦2.43 trillion.^[6] These transactions highlight M&A as a tool for survival, expansion, and strategic reorganization.

LEGAL FRAMEWORK REGULATING MERGERS & ACQUISITIONS IN NIGERIA

Mergers and acquisitions in Nigeria are governed by a multifaceted legal framework designed to ensure transparency, fairness, competitiveness, and protection of stakeholders’ interests. This framework comprises both general corporate laws and sector-specific regulations, administered by various regulatory authorities depending on the nature and scope of the transaction.

Companies and Allied Matters Act (CAMA), 2020

CAMA is the principal legislation governing corporate entities in Nigeria.^[7] It outlines the procedures for mergers, including shareholder approval,^[8] creditors’ rights,^[9] and court-sanctioned schemes of arrangement.^[10] Under CAMA, any compromise or arrangement proposed between a company and its creditors or members must be approved by a majority representing 75% in value of the stakeholders present at a meeting. The Act also requires such arrangements to be sanctioned by the Federal High Court to become binding.

Investments and Securities Act (ISA), 2025 & SEC Rules

The ISA, 2025 vests the Securities and Exchange Commission (SEC) with regulatory oversight of mergers, takeovers, and acquisitions.^[11] The SEC is empowered to approve, investigate, and, where necessary, reject proposed transactions that do not serve the public interest.^[12] The SEC Rules on Mergers, Takeovers and Acquisitions, 2022, provide detailed procedures, including filing requirements, timelines, and disclosure obligations.^[13] Companies must submit pre-merger notifications, obtain no-objection letters, and ensure post-transaction filings are properly executed.^[14] The rules also ensure fair treatment of minority shareholders and compliance with anti-competition standards.^[15]

Federal Competition and Consumer Protection Act (FCCPA), 2018

The FCCPA, 2018, enforced by the Federal Competition and Consumer Protection Commission (FCCPC), is aimed at promoting market competition and consumer welfare.^[16] It introduced new thresholds for mandatory merger notifications^[17] and empowers the FCCPC to review and approve M&A transactions, particularly where they may result in a substantial lessening of competition or consumer harm.^[18] Joint reviews by the SEC and FCCPC are now a mandatory requirement for larger transactions, especially those exceeding prescribed asset or turnover thresholds.

SECTOR-SPECIFIC REGULATIONS

Various sectors in Nigeria have their regulatory oversight mechanisms for M&As:

• Banks and Other Financial Institutions Act (BOFIA), 2020: Mandates the CBN Governor’s approval for M&A in the banking sector.^[19]
• Insurance Act, 2003: Requires prior approval from the National Insurance Commission (NAICOM) for any restructuring.^[20]

TAXATION AND EXCHANGE REGULATIONS

M&A transactions are also subject to tax considerations under the Companies Income Tax Act (CITA), 2007, which governs capital gains and tax liabilities that may arise from transfers of assets.^[21]

STEPS TO SUCCESSFULLY IMPLEMENTING AN M&A IN NIGERIA

Successfully executing a merger or acquisition in Nigeria involves a multi-phase process that integrates legal, regulatory, financial, and strategic considerations. Each stage must be carefully managed to ensure compliance and commercial viability.

Preliminary Planning and Due Diligence

The first step involves identifying a suitable merger or acquisition target and conducting comprehensive due diligence. This entails examining the target company’s financial statements, assets, liabilities, legal obligations, corporate governance structure, and regulatory compliance status.

Negotiation and Transaction Structuring

Upon satisfactory due diligence, parties negotiate terms and structure the transaction. Key decisions include whether it will be a merger by absorption, consolidation, or acquisition of shares or assets. At this stage, legal advisors draft a Memorandum of Understanding (MoU) or Term Sheet, setting out preliminary agreements, valuation methods, and timelines.

Regulatory Approvals and Notifications

Parties must seek and obtain approvals from relevant regulators such as the SEC, FCCPC, CBN, NCC, or NAICOM, depending on the sector. A joint filing to both the SEC and the FCCPC is mandatory for qualifying transactions. This step also includes submitting merger notifications, acquiring no-objection letters, and meeting publication requirements to notify the public and stakeholders.

Shareholder and Court Approval

A formal resolution must be passed at a general meeting by shareholders holding at least 75% of the voting rights. Subsequently, a petition is filed with the Federal High Court to sanction the merger or acquisition in accordance with CAMA.

Post-Merger Integration and Compliance

Upon approval, parties implement the transaction and begin post-merger integration, including restructuring, harmonizing operations, and notifying the Corporate Affairs Commission (CAC) and tax authorities. Ongoing compliance with financial reporting, competition laws, and employee transition plans is essential for long-term success.

CONCLUSION

Mergers and acquisitions have become essential tools for corporate growth, financial stability, and market competitiveness in Nigeria. From their modest beginnings in the early 1980s, M&A transactions have evolved into sophisticated legal and financial undertakings. The consolidation of Access Bank and Diamond Bank, the restructuring of Etisalat, and similar deals reflect the strategic and regulatory motivations behind M&As. Nigeria’s legal framework—including CAMA, ISA, BOFIA, FCCPA, and sector-specific regulations—provides the necessary structure to govern these transactions. Understanding the applicable laws and regulatory agencies is critical for mitigating risks and ensuring that corporate consolidations achieve their intended strategic objectives.

To implement a successful M&A in Nigeria, stakeholders must conduct rigorous due diligence, negotiate fair terms, secure regulatory approvals, obtain shareholder and court consent, and manage post-merger integration effectively. A proactive, well-advised, and compliant approach will not only ensure legal soundness but also maximize long-term corporate value.

REFERENCE

1. Abel Aondongu Adeke, ‘An Appraisal of the Legal Framework for Mergers and Acquisitions in Nigeria’ (2017) 7(5) International Journal of Accounting and Financial Management Research 23–36. ↑
2. Chinyelu Emechebe, Sylvia Ahaneku, and Chioma Okpalangwu, ‘Examining the Legal and Regulatory Framework for Safeguarding Employee Rights in Nigerian Mergers and Acquisitions’ (2024) 1(1) Nnamdi Azikiwe University Awka Journal of Commercial and Property Law 87–97. ↑
3. Ibid. ↑
4. For example, the CBN recapitalisation policies, which increase the minimum capital requirement for banks and other financial institutions, periodically, and prescribes merger and acquisitions as an acceptable way of raising new capital. See Central Bank of Nigeria, ‘Review of Minimum Capital Requirements for Commercial, Merchant, and Non-interest Banks in Nigeria’ (28 March 2024). https://www.cbn.gov.ng/Out/2024/CCD/Recapitalization_MARCH_2024.pdf accessed 14 May 2025. ↑
5. John Abayomi, ‘Access, Diamond Banks Shareholders Approve Merger’ Punch NG (5 March 2019). https://punchng.com/access-diamond-banks-shareholders-approve-merger/ accessed 14 May 2025. ↑
6. James Emejo and Nume Ekeghe, ‘Central Bank Approves Providus Banks’ Takeover of Unity Bank’ This Day Live (14 May 2025). https://www.thisdaylive.com/index.php/2024/08/07/central-bank-approves-providus-banks-takeover-of-unity-bank/ accessed 14 May 2025. ↑
7. CAMA 2020, Preamble. ↑
8. Ibid, s. 711(2) ↑
9. Ibid, s. 714(5). ↑
10. Ibid, ss. 711–715. ↑
11. ISA 2025, s. 139. ↑
12. Ibid, ss. 139–147. ↑
13. SEC Rules on Mergers, Take-overs, and Acquisitions (Review for Fairness of Mergers, Take-overs, and Acquisitions), 2020 (as amended). https://sec.gov.ng/wp-content/uploads/2021/09/New-Rules-and-Amendments-_Executed-30-August-2021.pdf accessed 14 May 2025. ↑
14. Ibid, r. 6. ↑
15. Ibid. ↑
16. FCCPA 2018, s. 1. ↑
17. Ibid, s. 92(4). ↑
18. Ibid, s. 93. ↑
19. BOFIA 2020, s. 7 ↑
20. CAP. I17, LFN 2004, s. 30. ↑
21. CITA 2007. ↑