There are different options available to companies wanting to engage each other in forming a stronger business organization for continuation of their object and, perhaps, to salvage a state of recession or total shut down. These options are generally referred to as ‘External Corporate Restructuring’. External Restructure of corporate bodies involves the different business arrangements and reshuffles involving more than one company. Such reorganization depends on the intent, desire and agreement between the involved bodies. Merger is one of these options.

Kayode Akindele
Former Graduate Intern, HARLEM Solicitors

Mergers, according to section 119(1) of the now amended Investment and Securities Act (ISA), 2007, is any amalgamation of the undertaking or any part of the undertakings or interests of two or more companies in the undertakings of part of the undertakings of one or more corporate bodies. In other words, a merger is a process where two previously autonomous companies combine to form another company under the common control of a new company comprising of all or substantial number of the shareholders of both companies. Pursuant to the ISA, the Securities and Exchange Commission (SEC) is the key regulator of mergers in Nigeria.

Previously, the Investment and Securities Act governed mergers in Nigeria and it empowered the Securities and Exchange Commission (SEC) to regulate all merger transaction in the Country. However, the Federal Competition and Consumers’ Protection Act (‘The Act’) repealed the provisions of ISA as they apply to mergers and introduces a change in the regulatory framework, stripping the SEC of its powers and conferring them on the Federal Competition and Consumers’ Protection Commission (‘The Commission’) established under it.

The Act supersedes all laws relating to competition and consumers’ protection in Nigeria except the Constitution and it creates the Competition and Consumers’ Protection Tribunal which is vested with judicial powers to review decisions of the Commission with powers to make rulings and orders that can only be set aside on appeal to the Court of Appeal.

SEC and FCCPC joint advisory and guidance on mergers acquisitions and pursuant to FCCPA

Forms of Mergers

Mergers could either be horizontal, vertical or conglomerate. A merger is horizontal when it involves two or more companies in the same line of business. An example is a merger between two or more Law firms, Banks, Telecommunication Companies etc. It is vertical when it is between two companies in complimentary businesses. This form of merger operates at different levels of production at the same market in the same geographical location. For example, where a timber processing company merges with a furniture making company. Lastly, a conglomerate merger is a merger between two or more companies in different lines of businesses. For example, a clothing company and a construction company.

Types of Mergers:

The Act provides for Small and Large mergers, no provision is made under the Act for Intermediate mergers.

Under the Act, a merger may be achieved in the following manners:

  • The purchase or lease of the shares, an interest or aspects of the other undertaking in question
  • The amalgamation or other combination with the undertaking in question or
  • A joint venture

The Act provides that an undertaking is said to have control over the business of another if it:

  • Beneficially owns more than one half of the issued share capital or assets of the company
  • Is entitled to cast a majority of the votes at a general meeting of the undertaking or has the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that undertaking
  • Is able to appoint or to veto the appointment of a majority of the directors of the undertaking or
  • Is a holding company and the undertaking is a subsidiary of that company as contemplated under the Companies and Allied Matters Act.

Conditions for the review of Mergers or proposed mergers:

The Commission shall determine whether or not the merger is likely to substantially prevent or lessen competition, by assessing the factors set out in the Act. A merger that appears likely to substantially prevent or lessen competition shall be prohibited by the commission except:

  • The merger/proposed merger is likely to result in any technological efficiency or other pro-competitive gain which would not likely be obtained if the merger is prevented.
  • The merger can be justified on substantial public interest including the effect that the merger may have on employment, the ability of national industries to compete in international markets, a particular industrial sector or region, the ability of small and medium scale enterprises to become competitive.

Procedures for small Merger:

  • A party to a small merger is not required to notify the Commission of that merger unless the Commission requires so or the party voluntarily notifies the Commission of that merger at any time
  • A party to a small merger may implement that merger without approval unless it is required to notify the Commission
  • Where the Commission requires a party to a small merger to notify it of the merger, the party shall do so in the prescribed form and manner within six months of the request
  • After the notification has been received, the Commission shall publish it within five business days
  • The parties to such merger that the Commission has required notification may take no further steps to implement that merger until the merger is approved by the Commission with or without conditions
  • The Commission shall consider the merger within 20 business days of receiving the notification. The commission may extend the period by a single period not exceeding 40 business days, where it does so, it shall issue an extension notice to the party that notified it of the merger
  • The Commission shall issue a report in the prescribed form approving the merger (with or without conditions) or prohibiting implementation of the mergers (if it has not been implemented) or declaring implementation to be prohibited (if it has been implemented)
  • Publication of a notice of the decision in the Federal Gazette
  • The Commission is required to issue written reasons for its decision where it prohibits or conditionally approves the merger or if it is requested by a party to the small merger to do so

It should be noted that the Act provides that upon the expiration of the 20 business days or upon the expiration of the extension period where an extension notice is issued, if the Commission has not issued a report of its decision on the notification of small merger, approval is deemed to have been granted.

Procedures for large Merger:

  • Notification shall be filed at the commission in the prescribed manner and form
  • Publication of the notification within five business days after receipt by the commission
  • Notice shall be given to any registered trade union that represents the employees in the acquiring and target companies or the representatives of the employees if there are no such registered trade unions
  • Mergers shall not be implemented unless approval (with or without conditions) is given by the commission. The Act provides that any violation of this provision is an offence punishable upon conviction with fine as prescribed by the Act
  • The merger shall be considered by the commission within 60 business days after receipt of the notification and it may extend the period to 120 business days and issue a notice of extension to the parties
  • The Commission shall issue a report in the prescribed form approving the merger with or without a condition or prohibiting implementation of the merger
  • The Commission shall issue its decision to the parties applying for the large merger and shall cause a notice of its decision to be published in at least two national newspapers
  • The Commission shall issue a written reasons for its decision where it prohibits or conditionally approves the mergers or if it is requested to do so by the parties

Note that where at the expiration of the 60 business days or at the expiration of the 120 business days if a notice of extension was issued, the Commission has not issued a report, the merger shall be regarded as approved.

It must be added that the Minister of Trade is empowered by the Act to make representations on any public interest ground to the commission with respect to any merger which is under consideration by the Commission which the Commission shall have special regard for subject to the provisions of the Act.

Revocation of Approval:

The Commission is empowered to revoke the approval granted by it where:

  • The decision was based on incorrect information for which a party to the merger is responsible
  • The approval was obtained by deceit
  • The parties fail to implement the merger within 12 months after the approval was granted
  • An undertaking concerned has breached an obligation attached to the decision of the commission approving the merger.


The coming into law of the Federal Competition and Consumers’ Protection Act is a welcome development as it aims to regulate and protect competition in the Nigerian Markets at all levels by eliminating monopolies, prohibiting abuse of a dominant market position and penalising other restrictive trade and business practice. (Adapted from the explanatory memorandum to the Act.

This article is an update on ‘Synopsis on Merger in the Nigerian Market‘ which appeared HERE and written by same author.


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