Legal Framework

Mergers, Acquisitions and Takeovers in Nigeria are governed by the Investments and Securities Act ("ISA"), the Securities and Exchange Rules and Regulations ("SERR") made pursuant to ISA, and the Companies and Allied Matters Act (CAMA).

The Securities and Exchange Commission ("the Commission") is the body in charge of implementing the provisions of ISA and sanctions Mergers, Acquisition and Takeovers in Nigeria.

Mergers and Acquisitions

Mergers and Acquisitions occur when a viable company takes over another company or two companies decide to merge to form a new company or to maintain the earlier names of one of the company.

Merger is defined by ISA 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 while Acquisition means the takeover by one company of sufficient shares in another company to give the acquiring company control over that other company.

Thresholds and Categories of Mergers

By the provision of Section 120 of ISA, the Commission from time to time has the power to prescribe a lower and an upper threshold of combined annual turnover or assets, or a lower and upper threshold of combinations of turnover and assets in Nigeria in general or in relation to specific industries, for purposes of determining categories of mergers. The lower and upper threshold as prescribed by the SERR is as follows:

  1. Small Merger
    The lower threshold for a small merger is below 1 million naira of either combined assets or turnover of the merging companies.
  2. Intermediate Merger
    The intermediate threshold is between 1 million naira and 5 million naira of either combined assets or turnover of the merging companies.
  3. Large Merger
    The upper threshold for a large merger is above 5 million naira of either combined assets or turnover of the merging companies.

Approval by the Commission

Every Merger and Acquisition is subject to the prior review and approval of the Commission. The approval is given if the Commission finds out that;

  1. Such Merger or Acquisition, whether directly or indirectly of the whole or any part of the equity or other share capital or of the assets of another company, is not likely to cause substantial restraint of competition or tend to create monopoly in any line of business enterprise.
  2. The use of such shares by voting or granting proxies or otherwise will not cause substantial restraint of competition or tend to create monopoly in any line of business enterprise.
  3. Though the contemplated Merger is likely to restrain competition, one of the parties to the merger has proved that it is failing.

Procedure for Intermediate and Large Merger

For companies with assets between the threshold of 1 million naira to 5 million naira and above the threshold of 5 million naira the following steps are taken for a successful Merger;

  1. The Board of Directors of the two Companies and the Companies will pass separate Resolution for Merger.
  2. Both companies will make an application to SEC as pre-merger Notice attached with;

    1. Complete merger Notification Form
    2. A letter of intent signed by the merging companies
    3. Board resolutions of the merging companies supporting the merger.
    4. A copy of the letter appointing the financial adviser
    5. Letter of no objection from the companies regulators (e. g CAC, Central Bank of Nigeria ("CBN") etc).
    6. The audited account of the companies for the last 5 years.
    7. A copy of the Memorandum and Article of Association of the merging entities.
    8. A detailed information memorandum of the proposed transaction including all the background studies relating to the merger, and justification for it.
  3. Forward a copy of the Merger notification to any registered trade union that represents a substantial number of its employees, or the employees concerned or representatives of the employees concerned, if there are no such registered trade unions.
  4. After the evaluation of the pre-merger notice with the documents attached, the Commission will grant an approval in principle to the merger after adequate consideration and direct the merging companies to make an application to the court to order separate meetings of shareholders of the merging companies in order to get their concurrence to the proposed Merger.
  5. Make an application to court to order separate meetings of shareholders of the merging companies.
  6. A majority representing not less than three quarters in value of the shares of members being present and voting either in person or by proxy at each of the separate meetings should pass a resolution agreeing to the scheme.
  7. File with the Commission a formal application for approval of the Merger attached with the following documents;

    1. Extract of the minutes of the court ordered meeting of the merging companies in support of the merger duly certified by the director and company secretary.
    2. 2 copies of the scheme document duly signed by the parties to the merger.
    3. Evidence of the executed resolutions passed at the separate court ordered meetings.
    4. Scrutineers report showing the result of voting and total number of votes cast.
  8. After formal approval by the Commission, make an application to court for an order sanctioning the scheme.
  9. Comply with post approval requirements.

3 months after the approval by the Commission, a post-merger inspection shall be carried out by the Commission to ascertain the level of compliance with the provisions of the scheme documents.

Small Merger

A party to a small Merger is not required to notify the Commission of that merger unless the Commission requires it to do so and may implement the Merger without approval unless required to notify the Commission. However a party to a small Merger may voluntarily notify the Commission of the merger at any time. A party to a small Merger required to notify the Commission shall take all the steps enumerated above for Intermediate and Large Mergers.

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.


For a Takeover to be sanctioned, a minimum of 30% of the shares of the target company must be bided for.

Procedure for Takeover

  1. The offeror (acquiring) company passes a Resolution to bid for the shares in another company.
  2. The offeror company makes an application to the Commission for an authority to proceed with the Takeover bid. The authority if obtained lasts for 3 months subject to renewal. The application would be attached with the following documents:

    1. The Takeover bid;
    2. Two copies of the information memorandum (where applicable);
    3. A letter of "no objection" from relevant regulatory body ( where applicable);
    4. A copy shareholders and board resolutions of the offeror certified by the company secretary approving the takeover;
    5. A copy of the certificate of incorporation certified by the company secretary;
    6. Copies of the memorandum and article of association of the offeror certified by the Corporate Affairs Commission;
    7. Copies of letters from the offeror appointing their financial adviser to the transaction.
  3. Upon receipt of authority to proceed with a Takeover bid, the bid proposal would be lodged with the Commission for registration and would be registered by the Commission if it is satisfied that it complies with the provisions of the Act.
  4. The following documents shall be filed with the Commission;

    1. 2 draft copies of the Takeover bid;
    2. Consent letters of directors and other parties to the transaction;
    3. CAC Form containing particulars of directors of the offeror;
    4. A copy of draft Financial Services Agreement between the financial adviser and the offeror, and any other agreement(s) entered into in the course of the transaction;
    5. Annual report and accounts of the offeror for the preceding period of five (5) years the company has been in existence;
    6. A draft newspaper publication of the proposed Takeover;
    7. Any other document the Commission may require from time to time.
  5. After successful registration, the Takeover bid shall be dispatched by the offeror concurrently to each director of the offeree (target) company; each shareholder of the offeree company and the Commission.
  6. The target company calls a meeting to consider the bid and not less than 90% of the shares subject to acquisition must be accepted.
  7. The offeror company is to give notice to the dissenting shareholders within 1 month of the acceptance of the bid to elect either to be paid like consenting shareholders or require their shares to be valued.
  8. The dissenting shareholders are to communicate their acceptance or otherwise within 20 days, if not they would be deemed to have accepted to be paid like others who accepted the bid.
  9. The offeror company must pay the amount due for the shares of the dissenting shareholders to the target company as a trustee.
  10. The offeror shall file with the Commission, within 7 working days of the conclusion of the offer, a schedule of target company shareholders who accepted the offer containing the volume and value of the respective shares and evidence of settlement of consideration.

A post-Takeover inspection shall be carried out by the commission not less than 3 months after registration of the bid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.