There are numerous companies in Nigeria, established mostly for profit making. The existence of these various companies has lent weight to Nigeria being known as one of the most industrious countries in Africa, as a greater population of her citizens own companies and businesses that either deal on production of goods or rendering of services. Incontrovertibly, there is bound to be a more demographic increase of these companies, given the high rate of unemployment which makes Nigerian citizens resort to owning companies; this they do, either as a major source of income or a secondary source of income, as getting a school degree is no longer sufficient to secure jobs in Nigeria.

These various companies pass through series of economic phases as they fudge ahead; at the times of economic boom, they experience economic buoyancy and during times of economic recession, they experience decline and setback. This has brought  about the need  for adjustment and re-adjustment for these companies to match every situation they are faced with.

The abrupt economic challenges and setbacks that usually befall companies in Nigeria have made companies pay rapt attention to corporate policies and strategies for dealing with economic opportunities and recessions and standing tall in midst of the multiple challenges. One of the corporate strategies, is synergy of companies, which will be discussed in this article.

The aim of this article is therefore, to look into the legislative and management strategies for unbeatable synergy of companies, which would promote survival and growth of companies in Nigeria amidst economic challenges and to obliterate the negative impression people have about synergy, especially as it relates to Mergers and Acquisition.

The Concept of Synergy and how it Relates to a Company

Generally, Synergy is the interaction and cooperation between two or more organizations’, people, substances or agents to produce a combined effect greater than the sum of their separate effects.[1] However, for the purpose of this article, the definition of Synergy that will be applicable would  be that which relates to the cooperation of two or more companies to produce greater effects. In this vein, the Oxford Learners Dictionary’s definition of Synergy will be adopted to define Synergy as the the extra benefits, energy, power, success, etc. that is achieved by two or more companies working together, instead of on their own.[2]

Synergy is the aspect of corporate strategy, corporate finance and management that deals with the combination of different companies that can aid, finance or help growing company to grow rapidly, without having to create another business or entity.[3] The concept of Synergy is the driving force for Mergers, Acquisitions and Takeovers of companies, which often result in rapid growth after application of such a Synergy.

The Rationale Behind Synergy

Often times, companies suffer challenges, like financial problems and liabilities either due to economic crises, recession or mismanagement of affairs, which makes them unable to meet up with financial responsibilities. During these times, some companies prefer to first apply, the internal modes of restructuring like: Reducing the Share Capital of the Company, changing the rights and liabilities of shareholders (Arrangement and Compromise), arranging some of their shares and putting up for sale (Arrangement on Sale), encouraging the management team with controlling shares to buy out some shares (Management-Buy-Out), etc. All of these approaches are done within the company, without synergizing with another company and this is why they are called Internal Restructuring.

However, when the Internal Restructuring does not savage the situation, most of these companies resort to external ways of restructuring their companies by integrating with other companies for a rapid and better effects, and this is known as Synergy, which brings about Merger, Acquisition and Takeover.

It is important to note that most companies proceed straight away to adopting Synergy, even without first attempting the internal modes of restructuring. The is because the companies in this category, already know the massive benefits of Synergy.

As earlier stated, companies wishing to synergize may do so either by way of Merger, Acquisition or Takeover and the meaning of these concepts will be discussed below.

  1. Merger: A merger involves the fusion of two or more corporate entities into one, usually on equal terms. The emerging entity could assume an entirely new name or retain the identity of one of the merging companies.[4]

There are different types of Mergers and they are:

  1. Horizontal Merger, which involves merging companies that deal on same line of business or products .e.g merging of Coca cola company and Seven Up company.
  2. Vertical Merger: This involves merging of companies that deal on goods, though different but complimentary to each other. e.g Coca cola Company and a Savannah Sugar Producing Company.
  3. Conglomerate Merger: This involves merging of companies that deal on entirely different line of business or products. e.g Yale Foods and a fabric Producing Company.
  4. Acquisition: This can be defined as a business combination where a company or group of companies, known as the Acquiring Company, buys most, if not all, of a company’s ownership stake in order to assume control of the other company, known as the Target Company.[5] Here, the Acquiring Company acquires more than 50% shares of the Target Company.
  5. Takeover: This is an external restructuring process that involves the acquisition of at least 30% (30% to 50%) of the shares or voting rights with the intention of taking over the Target Company. Where the Acquiring Company acquires the Target Company, both companies would form a single group in which the acquirer is the Holding Company and the Target company becomes the subsidiary. Here, both companies exist.[6]

        Types of Synergy

        There are three major types of Synergy amongst others, which are categorized according to the benefits achieved from the integration of companies.

        1. Revenue Synergy: Synergy is said to be a Revenue Synergy, when as a result of an acquisition, the combined companies are able to generate more sales than the two companies would be able to generate separately.[7]
        2. Cost Synergy: This type of synergy allows two companies to reduce costs as a result of the merger or acquisition.[8]
        3. Financial Synergy: This type of Synergy occurs when two or more mid-sized companies merge together to create financial advantages.[9] Going by this type of Synergy, the synergized companies do not only achieve financial advantages in the case of borrowing loans but also stand to benefit other advantages like access to debt, tax savings, and cash flow.

        Other types of Synergy include: Marketing Synergy, Management Synergy, Distribution network, etc.

        Benefits of Synergy

        There are several benefits of Synergy, and they include the following:

        1. Synergy brings about cost reduction in the operation and management of company affairs on synergized companies and makes results even more efficient than before.
        2. It causes provision of revenue enhancement through product extension or market dominance as a result of reduced competition between the synergized companies.
        3. It brings about risk diversification, as the expansion of companies will cause penetration into new areas of the markets other than the company’s traditional market.
        4. It creates opportunities for excess capacity utilization.
        5. It brings about reduction in tax liability resulting from tax-loss carry forward and unabsorbed capital allowances of one company against the profits of another.
        6. Synergy often provides the quickest entry into other markets and industries, among others.
        7. It enhances profitability through cost reduction resulting from economies of scale.
        8. The combined firms may constitute wider technological, marketing, or financial base that increases or even creates the potential for radical innovations in many directions Government encourages Synergy as a means of rationalizing the structure of industry to create large economic units that makes intervention and planning easier to combat foreign competition.

        Strategies for applying Synergy for the Survival and Growth of Companies in Nigeria

        The various strategies to be considered in adopting a Synergy with other companies are the Legislative and Management strategies.

        1. Legislative Strategies

        There are different legislative frameworks which have provided various guidelines and strategies that should be followed in adopting Synergy. Hence, companies that wish to adopt Synergy must have a good knowledge of these legislative guidelines, their provisions and when applicable. Some of these Legislative frameworks providing these strategies include the following:

        1. Investment and Securities Act 2007: This Act established the Securities and Exchange Commission (SEC), which is the apex regulatory body of the capital market. The Commission is charged with the functions of regulating and developing the Nigerian Capital Market. For companies that wish to form a Synergy and acquire more securities, SEC will help in doing the following:
        • Registering securities
        • Ensuring transparent and fair trading practices
        • Promoting professionalism, market efficiency and integrity
        • Regulating all forms of business combinations, etc.
        1. Federal Competition and Consumer Protection Act (FCCPA) 2019: Pursuant to Section 165 of FCCPA, Sections 118 to 128 of the Investment and Securities Act (which hitherto had provisions guiding mergers) have now been repealed. Thus, Mergers are now primarily governed by the Federal Competition and Consumer Protection Act.

        This FCCPA established the Federal Competition and Consumer Protection Commission (FCCPC) to regulate Mergers and give approval for them.

        1. The Central Bank of Nigeria (CBN) and the Banks and Other Financial Institutions Act (BOFIA): The CBN gets involved in Synergy where banking institutions are involved in such activities. The first strategy in such type of synergy that involves bank, is to first seek the approval of the CBN. Section 7 of the BOFIA No. 25 of 1991 in referring to Synergy states: “except with the prior consent of the Governor of CBN , no bank shall enter into an agreement:[10]
        • Which results in a change in the control of the bank;
        • For the sale, disposal or transfer howsoever of the whole or any part of the business of the bank;
        • For the amalgamation or Synergy of the Bank with any other person; and
        • To employ a management agent or to transfer its business to any such agent.

        After obtaining CBN’s approval for Synergies involving banks, then the consent of Securities and Exchange Commission (SEC) is obtained as well.

        1. Nigerian Stock Exchange (NSE): Where either combining firms are listed or any of them is listed on the stock exchange, the approval of the NSE is required. An application is made to the exchange to admit new shares or delete all or part of old shares.[11]
        2. National Insurance Commission (NAICOM): The Insurance Decree No.2 of 1997 empowers the National Insurance Commission to regulate Synergy within the insurance sector.[12]
        3. Federal Board of Inland Revenue (FBIR): The FBIR provides guidelines to follow in paying tax. FBIR values the transferred assets and calculates the capital gains tax payable where the acquisition is consummated by cash exchange.
        4. Federal Ministry of Finance (FMF): The FMF first of all confirms the approval status for shareholding in business especially where foreign shareholders are involved.
        5. Federal High Court: All Synergy require the approval of the federal high court before it is binding on shareholders.

        Management Strategies

        The process of Synergy is one that does not only require the fusion of two or companies   but also requires the coming together of the management, workforce and culture of the various companies. Therefore, the management of the two or more companies must liaise with each other and draw up a clear integration strategy. This helps in avoiding the uncertainties and anxieties that can demoralized the workforce of a newly acquired company, allowing employees to move on and focus on the future.

        Management Strategies involve the various strategies used in integrating the management, workforce and culture of various companies that engage in Synergy. Several strategies may be used, however, according to Telenbaum (1999),[13] seven key practical strategies can assist with a successful Synergy or acquisition and they include:

        1. Close involvement of human resource managers in the acquisition process, they should have a say in the process of Synergy because the success or failure of any organization depend on its human resources.

        2.      Building organizational capacity by ensuring that close attention is paid to the retention and

        recruitment of employees during the acquisition.

        3.      Ensuring that the integration is focused on achieving the desired effect, (for instance cost savings)  while at the same time ensuring that core strengths and competencies of the two companies are not damaged by the transition.

        4.     Carefully managing the integration of the organizations culture.

        5.     Completing the acquisition process quickly since productivity is harmed by the disorganization and demoralization that inevitably occur while the change is under way.

        6.    Communicating effectively with everyone who will be affected by the change. In the words of Applebaum, he stated that being truthful, open and forthright during an acquisition is vital in helping employees to cope with the transition.[14]

        • Developing a clear standardization integration plan. That is an integration plan overseen by a dedicated manager with the experience and interpersonal skills to calm employees’ anxieties and reconcile cultural differences.


        A rapid growth, sustainable progress, massive profits and constant survival of companies from fluctuating economic factors, is what every company owner desires. There is therefore a great need to embrace the practice of Synergy of companies, as it will bring expansion opportunities without tampering with the existence of previous companies, except with consent of the owners. Two good heads, resources, technologies, etc., are better than one, as the integration of companies would bring about torrents of advantages which the independent companies would ordinarily not have been able to do or done faster.


        Company owners are highly encouraged to adopt the practice of Synergy because of its multiple advantages. In doing this, the company owners can get facilitators of Company Synergy, to help them at every step of the way in actualizing their desires to integrate with other companies. There are various facilitators that you can reach out to and they include: Solicitors, the Financial Advisers (Solicitors can also help in this regard, Reporting Accountants to the Companies, Stockbrokers, etc.

        [1] what is synergy – Bing – accessed on the 23rd of November 2021.

        [2] synergy noun – Definition, pictures, pronunciation and usage notes | Oxford Advanced Learner’s Dictionary at  – accessed on the 23rd of November 2021.

        [3] Sparklyn Services-Research Material Bookshop: “Legal and Management Strategies; the Synergy for Survival and Growth of Companies in Nigeria” Legal and Management Strategies; the Synergy for Survival and Growth of Companies in Nigeria (  -accessed 22nd of November 2021.

        [4] Section 421of the Securities and Exchange Commission Rules 2013 and Section92(1) (a)of the Federal Competition and Consumer Protection Act.

        [5] Section 421 and 433 of Securities and Exchange Commission Rules

        [6] Section 131 of the Investment and Securities Act 2019

        [7] Revenue Synergies, Cost Synergies and Consolidation – Supplement Advisory ( -accessed on the 24th of November 2021.

        [8] Synergy in M&A | Types of Synergies in Mergers and Acquisitions ( – accessed on the 24th of November,2021.

        [9] Ibid

        [10] “Legal and Management Strategies; the Synergy for Survival and Growth of Companies in Nigeria” Legal and Management Strategies; the Synergy for Survival and Growth of Companies in Nigeria (  -accessed 22nd of November 2021

        [11] Ibid

        [12] Ibid

        [13] Telenbaum, T.J; “Beating the odds of Synergy failure: seven key practice and improve the chances for expected integration and strategies: Organizational Dynamics, Autumn(1999).

        [14] Applebaum, S.H. and Yortis, H; “Anatomy of a Synergy: Behaviour of organizational factors and processes throughout the pre-during-post stages: Management Decision ” (2000).

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