If you are involved in a merger, acquisition or takeover, you may feel overwhelmed by the opportunities, risks, timelines, and pressure involved. While you want your company to move forward, there is no room for missteps—often caused by uninformed decisions. Without the right legal structure, even successful businesses can falter.
After incorporation, a company may need to restructure due to financial challenges or growth stagnation. Restructuring may be internal or external. Common external methods include mergers, acquisitions, and takeovers.
This article outlines the key steps, procedures, and legal requirements for mergers, acquisitions, and takeovers to help you make informed restructuring decisions.
Table of contents
Mergers, Acquisitions and Takeovers
What are Mergers?
As per Section 92 of the Federal Competition and Consumer Protection Act (FCCPA), 2018, a merger occurs when one or more businesses acquire control over another. This may happen through share purchases, amalgamation, or joint ventures.
Rule 421 of the SEC (Consolidated) Rules 2013 also defines mergers as the combination of undertakings or interests of two or more companies or bodies corporate.
What are Acquisitions?
An acquisition happens when one company acquires enough shares in another to control it, usually making the acquired company its subsidiary. Rule 421 of the SEC Rules 2013 outlines acquisitions as takeovers granting control to the acquiring company. It applies mostly to private and unquoted public companies.
What are Takeovers?
Rule 445 of the SEC Rules 2013 defines a takeover as a situation where a person or group acquires at least 30% of shares in a public company with the intent of gaining control.
Read Also: How to get SEC license for Digital Asset Companies in Nigeria (2025)
Types of Merger Transactions
Horizontal Mergers
These involve direct competitors. If two companies produce or sell the same products, like Colgate merging with Close-Up, it’s a horizontal merger.
Vertical Mergers
These involve companies in a supplier-buyer relationship, like a car manufacturer merging with a tire producer.
Conglomerate Mergers
Companies involved are in unrelated businesses—for example, the merger between Lever Brothers Nigeria Ltd. and Cheseborough Products Industries Ltd.
Due Diligence in Mergers and Acquisitions
Due diligence ensures accurate information before a deal is finalized and includes:
Legal Due Diligence
1. Business Ownership
This involves confirming that the target company is legally incorporated and currently active. It includes reviewing its certificate of incorporation, licenses, permits, amendments, and constitutional documents like the Memorandum and Articles of Association (MEMART). The ownership structure—such as share capital, shareholder identities, and rights—must also be assessed, along with solvency and legal standing.
2. Business Profile
The acquiring company should understand the nature of the target company’s business operations, customer base, and contractual obligations. This helps to assess potential legal liabilities, commercial risks, and the sustainability of business operations.
3. Employees
This aspect involves reviewing employee contracts, labor union agreements, and obligations regarding pensions and benefits. It helps evaluate ongoing labor costs, disputes, or liabilities that could affect the transaction.
4. Intellectual Property & Technology
The acquirer must verify ownership and protection status of patents, trademarks, copyrights, trade secrets, and technological assets. Compliance with local and international IP regulations is essential to avoid future legal challenges.
5. Litigation Analysis
It’s important to identify existing or potential lawsuits, legal claims, and pending disputes. This includes reviewing insurance policies and understanding potential exposure to liabilities under contract or tort law.
6. Corporate Searches
These include regulatory checks at CAC, SEC, NSE, SON, NAFDAC, and land registries. These searches validate the target company’s disclosures and check for regulatory violations, liens, or encumbrances on assets.
Financial Due Diligence
- Financial Systems & Controls
- Past and Current Performance
- Tax Obligations
- Assets and Liabilities
- Profitability and Forecasts
- Creditworthiness
Procedure in Mergers and Acquisitions
Step 1: Pre-Merger Notification to SEC
- Approval of scheme by Boards
- Small mergers may not require notification unless SEC requests
- Large mergers require detailed notification and documentation
Step 2: Formal Approval
- Special resolutions at court-ordered meetings
- SEC to approve or reject within 20 to 60 working days
- Apply to FHC for merger to be sanctioned
Step 3: Post-Approval Notifications
- File court order with SEC within 7 days
- SEC conducts post-merger inspection within 3 months
Step 4: Notification to CAC
Register the merger notice with the CAC in compliance with Companies Regulations.
Procedure for Acquisitions
Acquirer submits a letter of intent via a registered capital market operator along with required documents such as:
- Information memorandum
- Board and shareholder resolutions
- Certificates and incorporation documents
- Consent letters and financial agreements
- Litigation summary and source of funds
- Valuation and annual reports (3–5 years)
- Press publication after consummation
Why Choose Mergers or Acquisitions?
Benefits include diversification, reduced competition, cost efficiency, faster growth, and increased market share.
Can a Merger Be Revoked?
Yes. The FCCPC can revoke an approved merger if obtained by deceit, not implemented within 12 months, or if obligations are breached.
Conclusion
Mergers, acquisitions, and takeovers offer major growth opportunities, but they require thorough legal and financial due diligence. The key to success lies in preparation and informed decisions backed by professional guidance.
Sources
- Federal Competition and Consumer Protection Act, 2018
- Securities and Exchange Commission (Consolidated) Rules, 2013
- Legal framework for Mergers and Acquisitions by Prof. C. O. Okonkwo
Disclaimer: This publication is for general guidance only and not professional advice. For legal advice, contact us:
Email: info@tcorporatelegaladvisory.com
Tel: 08062348867, 09080119975, 09080119980
Written by:
NWOKOCHA ANNASTECIA CHIDINMA, LL.B
T CORPORATE LEGAL ADVISORY
