At the start of the pandemic, deal activity experienced a downturn, particularly between 2019 and 2020. However, 2021 marked a record-breaking year for global M&A activity compared to pre-COVID-19 levels. In 2022, Nigeria saw continued growth in M&A activity across different sectors, including technology (particularly start-ups), financial services, telecommunications, manufacturing, consumer goods, and oil and gas. These deals encompassed both local and cross-border transactions, with start-ups raising significant funds to expand their operations and businesses.
In 2022, the financial services sector saw notable activity, with Titan Trust Bank, Fidelity Bank, Access Bank, and Guaranty Trust Holding Company Plc all acquiring or pursuing stakes in other financial services businesses. A noteworthy deal in the oil and gas sector, which remains in the spotlight due to regulatory challenges, is Seplat Energy’s acquisition of Mobil Producing Nigeria Unlimited’s offshore shallow water business assets. This deal is still pending regulatory approval. Another significant development in this sector is the suspension of Shell’s divestment of its interest in its Nigerian subsidiary, Shell Petroleum Development Company.
Key industries experiencing considerable M&A activity included the startup technology space, which received substantial PE/VC funding in areas like fintech, agri-tech, insur-tech, edu-tech, and health-tech. Other active sectors included oil and gas, financial services (including banking, insurance, and pensions), and healthcare.
Recent prominent transactions in the oil and gas sector included the Nigerian National Petroleum Corporation Limited’s acquisition of OVH Energy Marketing, which owns and operates Oando’s downstream assets; the above-mentioned acquisition by Seplat Energy of Mobil Producing Nigeria Unlimited’s offshore shallow water business; and TNOG Oil & Gas Limited’s (a related company of Heirs Holdings and Transcorp) acquisition of a 45% participating interest in Nigerian oil license OML 17 and related assets from Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited, and ENI.
In 2022, the financial services sector played a significant role, accounting for approximately 43% of the total deal volume. Key transactions included Titan Trust Bank Limited’s acquisition of 89.39% of Union Bank of Nigeria Plc’s issued share capital and Guaranty Trust Holding Company Plc’s acquisition of 100% of the shares in Investment One Funds Management Limited. In June 2022, Access Bank Plc entered into a binding agreement with Kenya-based Centum Investment Plc to acquire Centum’s entire 83.4% equity stake in Sidian Bank Ltd. Fidelity Bank Plc’s proposed acquisition of 100% equity in Union Bank UK Plc, while not an investment in Nigeria, represents an outward investment by a Nigerian company. First Pension Custodian Nigeria Limited, a subsidiary of First Bank Nigeria Limited, acquired 100% of Access Pension Fund Custodian Limited (a subsidiary of Access Bank Plc). Access Holdings also received regulatory approval to acquire a majority stake in First Guarantee Pension Limited. Norrenberger, a Nigerian financial services group, obtained approval from the National Insurance Commission (NAICOM) to acquire 100% of International Energy Insurance Plc.
In the manufacturing sector, Flour Mills of Nigeria acquired a 76.75% stake in Honeywell Flourmills PLC.
In the healthcare sector, mPharma acquired a majority stake in HealthPlus, a leading pharmacy chain in Nigeria, while Verod Captal Management Limited acquired a significant minority equity stake in Medplus Limited, the largest pharmaceutical retail business in Nigeria.
In the telecommunications sector, Equinix, Inc, the US digital infrastructure company, acquired West African data centre and connectivity solutions provider MainOne.
In Nigeria, acquisitions of private companies typically occur through share sale and purchase agreements or share subscription agreements.. For acquisitions of public companies, court-sanctioned schemes of arrangement and schemes of merger are favoured. An acquisition by a scheme requires the approval of 75% of the shareholders of the affected companies, present and voting at the court-ordered meeting. Following approval by the shareholders of the relevant companies, the sanction of the court is necessary.
A share acquisition generally involves the acquisition of some or all of the shares of a target company. If it includes a subscription for shares, the acquisition could be between the acquirer and the company. If a share transfer is anticipated, the acquisition is between the acquirer and the relevant shareholder(s) of the target company. It could also involve a combination of share subscription and share transfer, in which case the acquirer contracts with the target company and the selling shareholder(s).
For publicly listed companies, shares can be acquired through the relevant securities exchange, private placement, or takeover (mandatory or otherwise).
Public companies are generally required to issue securities to the public. However, they can issue shares to select investors through private placements, provided that they obtain prior approval from the Securities and Exchange Commission and at least 75% of the company’s shareholders.
A mandatory takeover offer obligation arises when (i) a person or group acquires shares representing 30% or more of a public company’s voting rights or (ii) a shareholder, along with other persons, holds shares representing between 30% and 50% of a public company’s voting rights and acquires additional shares in the company. Generally, dealmakers’ chosen structure depends on various factors, including tax implications, cost implications, complexity, time constraints, stake size, strategic and business plans, acquirer’s risk appetite, and regulatory constraints.
An asset acquisition generally involves acquiring specific assets and rights, and in some cases, assuming certain liabilities of a company. In this structure, parties must identify and negotiate the specific assets the buyer will acquire, as assets do not automatically transfer to the buyer. The seller in an asset acquisition is the company itself, not its shareholders. An asset acquisition is executed through an asset sale agreement, containing the specific details of the assets being acquired and the conditions under which they are transferred or acquired. Parties must ensure compliance with all formalities required for the transfer of specific assets, including regulatory consents, third-party consents, and transfer formalities for assets such as land, employees and intellectual property rights.
Depending on the terms of the Articles of Association of the parties involved in an asset acquisition, 75% of their respective shareholders may need to approve major asset transactions. The Companies and Allied Matters Act 2020 defines a major asset transaction as (i) a purchase or other acquisition outside the usual course of a company’s business or (ii) a sale or transfer outside the usual course of a company’s business, of assets representing, as of the completion date of the transaction, 50% or more of the book value of the company’s assets based on the most recent balance sheet.
The primary regulators of M&A activity in Nigeria are:
Non-Nigerian persons and companies are generally permitted to invest in all sectors and businesses in Nigeria, with the exception of the production of arms and ammunition; production of and dealing in drugs, narcotics and other psychotropic substances; the production of military and paramilitary wares and accoutrements; and such other items as determined by the Federal Executive Council from time to time.
However, there are certain sectors in which companies that are wholly owned by foreign investors cannot operate or which have local content regulations that prescribe minimum local content thresholds and incentives for Nigerian-controlled companies. Examples of such sectors include the oil and gas and aviation sectors.
In Nigeria, the generally applicable merger control framework is contained in the Federal Competition and Consumer Protection Act 2018 and the various regulations, guidelines and notices made pursuant to that statute.
Generally, a transaction resulting in a change in control of a Nigerian undertaking will require the prior approval of the FCCPC, if the notification threshold prescribed by the FCCPC is met. The Notice of Threshold for Merger Notification provides that a merger will require notification to the FCCPC if (i) the combined annual turnover of the acquiring undertaking and target undertaking in, into or from Nigeria equals or exceeds NGN1 billion (approximately USD2million); or (ii) the annual turnover of the target undertaking in, into or from Nigeria equals or exceeds NGN500 million (approximately USD1million).
Merger reviews are conducted in a two-stage process. In the first phase, the FCCPC will assess whether the transaction is likely to substantially prevent or reduce competition. If it is likely to, the parties will be allowed to offer remedies if the competition concerns are of a remediable nature. Upon completion of its review, the FCCPC will either approve the transaction unconditionally or subject to accepted remedies or, if the transaction still raises competition concerns, proceed to the second phase in which it will undertake a second detailed review.
In Second phase of its review, the FCCPC will consider whether there are any technological efficiencies or other pro-competitive gains, or public interest grounds, which are sufficient to offset the competition concerns. If the FCCPC makes a positive determination on either ground, it will approve the transaction subject to conditions which it deems appropriate, otherwise, the transaction will be refused.
There are various laws governing employment-related matters in Nigeria. These laws include:
In addition to any mandatory provisions of these laws, the relationship between an employee and employer is regulated by contract. Therefore, an acquirer in an M&A transaction ought to be mindful of the target companies’ compliance with the employment-related laws and the relevant contracts of employment. It is usual for Nigerian companies to have standard terms of employment for staff, except for senior management staff.
Transfer of Employees
In an asset sale, employee consent is required for transferring employment from one employer to another. In some cases, the contract pursuant to which an employee is being transferred to another employer must be endorsed by an authorised labour officer serving in the Federal Ministry of Labour.
In a share sale, there is no requirement to transfer employees, as only the ownership of the target company changes. There is also no requirement to obtain the consent of the employees to the share sale.
However, for merger control purposes, the FCCPC mandates parties to provide a copy of the merger notice to any registered trade unions, or employees or their representative(s) if no registered trade union exists.
There is no national security review of acquisitions in Nigeria.
Significant developments related to M&A in Nigeria in the past three years include the enactment of the Companies and Allied Matters Act 2020 which introduced:
The Business Facilitation (Miscellaneous Provisions) Act 2023
This act amends Section 142 of the Companies and Allied Matters Act 2020, limiting the pre-emptive rights of shareholders to newly issued shares, applying exclusively to private companies. Consequently, public companies are no longer obligated to initially offer newly issued shares to their existing shareholders. The act also establishes a 21-day timeline, beginning from the date of the notice of newly issued shares, for existing shareholders to exercise their pre-emptive rights. Before this act, the timeline was unspecified, requiring companies to provide existing shareholders with a reasonable period to exercise their rights of first refusal.
In 2021, SEC published amendments to its Rules on Mergers, Takeovers and Acquisitions, to establish its new role in M&A. Among other changes, the amendments expand the definition of affected transactions under Rule 1 to include carve-outs, spin-offs and split-offs of public companies. Notably, the revised Rule 3 now mandates that SEC approval must be obtained prior to any merger involving a public company or its subsidiaries, and the obligation to obtain said approval is placed on the public company involved in the transaction.
SEC will only grant the necessary approval if it is satisfied that all shareholders are fairly, equitably, and similarly treated, and provided with sufficient information about the transaction. As a result, mergers involving public companies and their subsidiaries may fall within the purview of both SEC and the FCCPC. While SEC focuses on whether the merger meets the conditions mentioned above, the FCCPC will concentrate on whether the merger could significantly prevent or reduce competition.
Under Nigerian law, stakebuilding prior to making a takeover bid or a mandatory offer is not prohibited and is not considered unusual.
Under Nigerian law, there are material shareholding disclosure thresholds and filing obligations under the Companies and Allied Matters Act, 2020 (CAMA 2020), the rules of SEC and the Nigerian Exchange (NGX). Under CAMA 2020, any person holding shares directly or indirectly in a public company that entitle them to exercise 5% of the unrestricted voting rights at a general meeting (a “Substantial Shareholder”) is required to give notice in writing to the company within 14 days of becoming aware that they are a Substantial Shareholder. Upon receipt of the notice, the company is required to also give notice to the Corporate Affairs Commission (CAC) within 14 days.
Any person with significant control over a company is also required, within seven days, to give notice of this fact to the company, following which the company must itself give notice to the CAC within one month of receipt of the notice from the shareholder with significant control. A person with significant control is defined under CAMA 2020 to include any person directly or indirectly holding at least 5% of the shares, interest or voting rights of a company or limited liability partnership (LLP); or holding the right to appoint or remove a majority of the directors or partners of a company or LLP; or having the right to exercise or actually exercising significant influence or control over a company or LLP.
SEC also mandates the disclosure of the particulars of holders of 5% or more of the shares of public companies to SEC and the NGX. The Rulebook of the NGX contains a similar disclosure requirement in relation to listed companies. Under the Rulebook of the NGX, a listed company is required to notify the NGX of any transaction that brings the beneficial ownership in the company’s shares to 5% within ten business days after such transaction. A listed company is also required to disclose, in its annual report, details of the holders of 5% or more of the shares of the company.
A company’s Articles of Association (“Articles”) may prescribe a lower reporting threshold for shareholder disclosures, but it cannot establish a higher threshold through its Articles. If a lower threshold is adopted, the company will not be required to notify the CAC.
Aside from the above, potential cost and timing implications of regulatory processes in stakebuilding could pose challenges. The Merger Review Regulations and Guidelines necessitate notifying the FCCPC of transactions involving the acquisition of minority shareholding that grants the acquirer material influence over a company. Under these regulations, acquiring a 25% shareholding in a company leads to a rebuttable presumption of material influence. Any subsequent transaction resulting in de facto or legal control will create a new relevant merger situation, requiring FCCPC approval once more.
Dealings in derivatives are permitted in Nigeria subject to compliance with the derivatives market rules of the relevant exchange, SEC Rules on the Regulation of Derivatives Trading (“SEC Rules on Derivatives”) and the Rules on Central Counterparty, and the Central Bank of Nigeria’s Guidelines for FX Derivatives in the Nigerian Financial Markets.
Filing obligations under securities and competition laws will arise where a person, due to their derivatives holding, becomes a substantial shareholder or becomes a person with significant control of a company. Such a person will be required to comply with the notification requirements discussed in 4.2 Material Shareholding Disclosure Threshold and may be required to obtain the approval of the FCCPC as discussed in 4.3 Hurdles to Stakebuilding.
SEC Rules on Derivatives require the following:
Where a merger control filing is required, an acquirer will be required to provide the FCCPC with the rationale for the acquisition.
Furthermore, for listed companies, an application seeking NGX approval for an acquisition must include the buyer’s investment objectives, management continuity plans, and the post-acquisition management profile of the target. The buyer’s intentions regarding the target’s employees must also be disclosed.
Disclosures by Listed Companies
For listed companies, the giving or receiving of a notice of the intention to make a takeover, merger, acquisition, tender offer or divestment is classified as price-sensitive information. While a listed company is not prohibited from disclosing a deal to the relevant advisers, it is required to advise such advisers or any relevant third party of the confidential nature of the information and that it constitutes insider information.
Where a listed company is required to disclose price-sensitive information to a third party or regulator and such information enters the public domain, the company must ensure that the information is simultaneously released to the market.
A target company is required to announce a proposed transaction after its board has approved the terms of the definitive agreements for the deal.
Disclosures by Private Companies and Unlisted Public Companies
There is no requirement for private or unlisted public companies to announce deals. Therefore, parties are free to deal with such disclosures as they wish, subject to any confidentiality agreements that may exist. However, parties tend to limit information to employees generally, except for senior management.
The market practice on timing of disclosure does not differ from the legal requirements discussed above.
In Nigeria, due diligence exercises will usually cover legal, commercial, financial, and tax issues. The scope of the diligence exercise will differ from one transaction to the other and could also depend on whether the transaction is structured as a share or asset deal.
In conducting due diligence exercises, parties need to consider regulatory restrictions that impact the disclosure of certain types of information, eg, price-sensitive information, especially in transactions involving competitors. In Nigeria, the FCCPC expects parties to take measures that restrict the flow of competition-sensitive information to competitors even during a due diligence exercise. Such measures include the use of a clean team and data anonymisation.
Impact of the Pandemic on Due Diligence
Because of the travel/movement restrictions imposed during the pandemic, dealmakers had to conduct due diligence exercises virtually, using virtual data rooms. In some cases, drones were used for the inspection of facilities and sites.
In terms of scope, dealmakers have become concerned about the effect of the pandemic on target businesses and on events-based termination of material contracts.
Standstill agreements are not common in Nigeria. It is more common for a potential acquirer to request exclusivity, which will typically be negotiated by the parties. On the other hand, the target will be looking to limit the exclusivity period to ensure that negotiations are concluded quickly. However, a target is likely to be more reluctant to grant exclusivity in an auction sale.
It is permissible under Nigerian law for the terms and conditions of a tender offer to be negotiated and documented in a definitive agreement.
Timeline for Acquisition/Sale
The timeline for completing an acquisition will generally depend on the transaction structure and process adopted by the relevant parties. In practice, and particularly in transactions involving private companies, the parties will typically agree the transaction timetable. Some of the factors that could impact the timeline for a transaction include internal approvals, regulatory filings and approvals, financing arrangements, the preparedness of the seller for due diligence and the complexity of the transaction. For instance, competition filing with the FCCPC could take up to 120 business days, except for transactions where material competition concerns do not arise, which the FCCPC aims to review and approve within 45 business days.
For transactions involving publicly listed companies, the acquirer will have to factor the statutory and regulatory steps and timelines to execute the transaction into its timetable.
For mandatory takeovers, the 2007 Investment and Securities Act and the SEC Rules prescribe specific timelines within which each required step must be completed. Some of these timelines are outlined below:
Delays to Deal-Closing Process by Governmental Measures to address the Pandemic
Under the Business Guidance Relating to COVID-19 on Business Co-operation/Collaboration and Certain Consumer Rights under the Federal Competition and Consumer Protection Act (FCCPA), transactions that might otherwise be deemed restrictive to competition are exempted from competition prohibition by the FCCPC if entered into solely for responding to the pandemic. However, this exemption is not automatic, as the approval of the FCCPC is required for such transactions, and there are information and operational considerations that must be met for the FCCPC to grant approval. These considerations may potentially cause delays in deal-closing for these transactions.
Aside from the aforementioned measures provided by the FCCPC to address the pandemic, there were no other government measures in response to the pandemic that could have caused delays in deal-closing at the time.
Under Nigerian law, a mandatory offer must be made in the circumstances outlined in 2.1 Acquiring a Company.
In Nigeria, the consideration in M&A transactions will generally be cash or shares, or a combination of both, or any other form of consideration other than cash.
To deal with valuation uncertainties, some of the mechanisms that parties adopt include earn-outs, deferred consideration, locked-box mechanisms and completion accounts.
In Nigeria, the conditions attached to a takeover offer will usually be determined by a contract between the parties. Some of the usual conditions will include obtaining all the required internal approvals and regulatory sanctions. For public takeovers, a bidder is required to include the terms on which the shares are to be acquired, among other things.
There are no statutorily prescribed minimum acceptance conditions. Minimum acceptance conditions have been used in tender offers as they are beneficial to a bidder’s attainment of its intended level of control or stake in the target.
However, for listed companies, the Rulebook of the NGX requires an offer to state all conditions attached to acceptances, including whether the offer is conditional on the receipt of acceptance in respect of a minimum number of securities. In such cases, the offer should include the minimum number and the last date on which the offer can be made unconditional.
The Rulebook of the NGX also prohibits an offer that is conditional on the payment of compensation for loss of offer without disclosing full particulars.
In practice, there are cases where a majority shareholder looking to acquire full control of a target by acquiring the shares of the minority shareholders has done so by a scheme of arrangement. The use of a scheme is beneficial for this purpose because once approved by persons holding 75% of the voting rights of the target, the terms of the scheme become binding on all the shareholders of the company.
The parties to a business combination can agree that the transaction will be conditional on the bidder obtaining financing. This is largely a contractual issue that will need to be negotiated and agreed upon by the parties.
For takeovers, SEC requires a bidder to file its evidence of source of funds at the point of applying for approval to proceed with the bid.
Bidders generally have the freedom to seek measures they deem necessary to protect their interests in a deal. The type of security a bidder is likely to obtain largely depends on negotiations with their counterparty and their bargaining power. Common deal protection measures include break fees, matching rights, and non-solicitation provisions. Although Nigerian law does not expressly prohibit “force the vote” provisions or “no shop” agreements, these measures might conflict with a target company’s directors’ fiduciary duties under CAMA 2020.
The Effect of the Pandemic on Deal Terms
The inclusion of pandemic-related clauses in material adverse change provisions is now more frequently considered by the parties, as they may allow a party to terminate an agreement due to changes in the target’s business during the interim period.
There has been an increasing need for targets to give representations that cover the target’s supply chain and business continuity plans.
Parties have had to adopt other methods of valuation in determining pricing. As the pandemic significantly impacted companies’ revenues and such COVID-19 revenues could not be used as an accurate indicator of future earnings, there have been cases where sellers have pushed for the targets’ pre-COVID-19 revenues to be used as a benchmark for valuation instead.
Changes to the Regulatory Environment impacting the Length of Interim Periods
The regulatory changes that may impact the length of interim periods are outlined in 6.1 Length of Process for Acquisition/Sale.
A bidder who does not seek 100% ownership of a target may seek additional governance rights such as the right to a board seat(s), the right to appoint a chairman, the right to appoint and remove key officers such as the CEO or CFO, and veto rights over reserved matters.
It should be noted that the possession of some or all of these rights could, even where the bidder has no legal control, trigger a competition filing as the bidder could be deemed to be able to exercise material influence over the target’s business. See 4.3 Hurdles to Stakebuilding.
Shareholders are permitted to vote by proxy under Nigerian law.
In a takeover, an acquirer may only squeeze out dissenting shareholders if it has already acquired 90% of the shares that are subject to acquisition. The dissenting shareholders may elect to have their shares acquired on the same terms offered to the consenting shareholders or to receive fair value for their shares, as determined by the Federal High Court.
A bidder is not prohibited from seeking commitments from principal shareholders prior to making a formal announcement of its intention to acquire shares in the target company. The terms of the undertaking will be negotiated and agreed upon by the relevant parties before a formal offer is made to the target company.
Irrevocable commitments may give a bidder some certainty as to the outcome of the tender offer, as they could guarantee that the bidder will be able to acquire a minimum number of shares in the target company.
The principal shareholder may be bound by an irrevocable commitment to the bidder or otherwise be at risk of a civil action for breach of contract, specific performance, injunction or any other remedy agreed with the bidder as a remedy for breaching the commitment. In such instances, the principal shareholder may seek indemnity from a subsequent bidder with a better offer against costs resulting accrue from breaching the irrevocable commitment.
For private company transactions, it is not common for bids to be made public. However, where a transaction requires the approval of the FCCPC, the FCCPC publishes a summary of the proposed transaction upon an application for its clearance.
For public company transactions, where a mandatory bid is triggered, an application for authority to proceed with a takeover bid should be filed with SEC within three business days of the triggering event, and the intention to make a takeover bid should be published in at least two national daily newspapers, on the company’s website, as well as announced on the floor of any exchange on which the shares are listed.
On registration of the takeover bid by SEC, a formal bid can be made by the buyer to the shareholders of the target company and published in two national daily newspapers. The bid is also required to be dispatched to the board of directors of the target company and SEC at the same time that it is sent to the shareholders.
In private transactions, the type of disclosure required would usually be agreed upon by the transaction parties.
For business combinations involving companies listed on the NGX, any document or advertisement addressed to shareholders containing information or advice from an offeror or the board of an offeree company or their respective advisers must, as is the case with a prospectus, be prepared with the highest standards of care and accuracy.
There is no requirement to disclose the financial statements of the offeror to the shareholders of the target. However, the financial statements of the offeror for five years preceding the offer are to be filed with SEC during the application for the registration of a takeover bid. Financial statements are typically prepared under the GAAP or IFRS principles.
With the introduction of the 2023 Business Facilitation (Miscellaneous Provisions) Act, financial statements are to be prepared in the form and content adopted by the Financial Reporting Council of Nigeria.
It may be necessary to disclose transaction documents in full to regulatory bodies in the process of obtaining requisite transaction approvals or waivers.
Under Nigerian law, directors have extensive common law and statutory duties which apply in the performance of their duties, including during a business combination.
The principal duties include the duty to act in good faith at all times in the best interests of the company as a whole. The directors are also expected to have regard to the impact of the company’s operations on the environment in the community where it operates, the interests of the company’s employees in general and the interests of the company’s members.
If any payment is to be made to a director of a company as compensation for loss of office or as consideration for or in connection with the director’s retirement during a business combination, it is the duty of that director to do all things reasonably necessary to ensure that particulars with respect to the payment and the amount are included in, or sent with, any notice of the offer made for the shares which are given to any shareholder.
It is common for boards of directors to establish special or ad hoc committees in business combinations. The aim is usually to ensure efficiency and effectiveness during the process. The committees may also be used in cases where directors have a conflict of interest, although there is no regulatory requirement to do so.
The general approach of courts in Nigeria is to uphold decisions of the board of directors which have been made within the bounds of their powers under Nigeria's company law and the company's constitutional documents.
While there has been no case law in Nigeria on the business judgement rule in takeover situations, it is expected that the courts will defer to the judgement of the board of directors provided that there has been no breach of the directors' duties, fraud, or negligence.
It is typical for directors to obtain independent third-party advice from financial, tax and legal advisers in connection with business combinations.
Conflicts of interest are scrutinised in Nigeria.
In the context of directors, Nigeria’s company law provides that the personal interest of a director shall not conflict with any of their duties as a director under the law and that a director shall not, in the course of managing the affairs of a company, make any secret profit or achieve other unnecessary benefits. It is also the duty of any director of a company who is in any way, whether directly or indirectly, interested in a transaction or a proposed transaction with a company, to immediately notify the directors of such company in writing, specifying the particulars of the director’s interest.
In addition, the 2018 Nigerian Code of Corporate Governance (“the Code”) recommends that:
Generally, companies are expected to establish a policy for related-party transactions and to report all related-party transactions in their financial statements.
There are no provisions under Nigerian law specifically on hostile tender offers. The existing legal framework for tender offers covers tender offers generally, and it is possible to execute hostile tender offers under the framework. Hostile tender offers are not common in Nigeria.
There is no legal framework for directors’ use of defensive measures in hostile takeover scenarios in Nigeria. It is possible for directors to adopt common defensive measures available in other jurisdictions, provided that they have regard to their fiduciary duties to the company.
See 9.1 Hostile Tender Offers. Hostile takeovers are not common in Nigeria.
As stated in 9.1 Hostile Tender Offers and 9.2 Directors’ Use of Defensive Measures, there is no legal framework for hostile tender offers, bids and takeovers in Nigeria. There are also no provisions specific to defences available to directors in such instances. Directors would, therefore, be bound by their general duties under Nigeria’s company law, which include the duty to:
In relation to takeover bids, the board of directors of the target company is required to send a circular to every shareholder of the target company and SEC at least seven days before the takeover bid is to take effect. The circular should contain the opinion and recommendation of the board of directors in relation to the takeover bid, including the effect of the bid on the operations of the company and its employees, as well as expert opinions, where applicable.
Directors cannot “just say no” and take action that prevents a business combination. They are expected to take reasoned decisions having regard to the interests of the company, employees, shareholders and environment as a whole.
Litigation is not common in M&A transactions in Nigeria. Definitive agreements for private M&A transactions would typically contain arbitration provisions. However, these arbitration provisions are rarely invoked, as parties typically favour commercially agreed resolutions.
See 10.1 Frequency of Litigation.
See 10.1 Frequency of Litigation.
Shareholder activism is an important consideration for boards of directors in Nigeria and includes activism from institutional investors and minority shareholder groups. Nigeria’s company and securities laws are minority shareholder-friendly and provide several tools for shareholder activists to adopt. Activists typically focus on corporate governance, management changes and changes to a company’s strategy. Shareholder activists may sometimes aim to frustrate minority buyouts and “take private” transactions (ie, delistings). A few such transactions have been aborted in the past, largely due to the action of activists.
SEC has also set out a code of conduct for shareholder associations to ensure that its members contribute positively to the affairs of public companies. It provides that member shareholders are to strive to influence policies that encourage investment and advance the interest of shareholders.
See 11.1 Shareholder Activism.
It is not uncommon for activists to seek to interfere with the completion of announced transactions.
Overview of 2022 M&A Activities
In 2022, Nigeria continued to witness growing M&A activity across different sectors. There was a particularly significant increase in deals in the technology sector, especially in the start-up space, financial services, telecommunications, manufacturing and consumer goods and oil and gas sectors.
The financial services sector was a major player in 2022 and was reported to account for about 43% of the total deal volume in 2022. Key transactions in the financial services sector include:
In the oil and gas sector, notable transactions include:
Key Regulatory Developments
The following recent key regulatory developments have had an impact on M&A.
The 2023 Business Facilitation (Miscellaneous Provisions) Act
The 2023 Business Facilitation (Miscellaneous Provisions) Act (BFA) was enacted to promote ease of doing business in Nigeria and amended 21 relevant business-related legislations to ensure transparency and efficiency in the public sector. Notable changes affecting M&A transactions include:
2022 Persons with Significant Control Regulations
On 23 November 2022, the Corporate Affairs Commission (CAC) with the approval of the Minister of Trade, Industry and Investment issued the 2022 Persons with Significant Control Regulations (the “PSC Regulations”) to provide a framework for obtaining details on persons with significant control and beneficial owners of a company, limited liability partnership and any other relevant entity. The PSC Regulations also amend existing CAC forms to include more detailed information on persons with significant control.
The PSC Regulations broaden the definition of a person with significant control to encompass beneficial owners who ultimately own or control a company or limited liability partnership, or on whose behalf a transaction is conducted. This includes individuals who exercise ultimate effective control over a legal person or arrangement. However, the definition now excludes juristic persons. As a result, persons with significant control under the PSC Regulations are natural persons who:
Companies and limited liability partnerships now have the responsibility to take reasonable steps to identify persons with significant control and to notify the CAC of their details. A company or limited liability partnership can also serve a notice on a person believed to exercise significant control, requiring them to provide relevant details demonstrating such control. Failure to provide the required details may result in restrictions on the rights attached to the shares of the person. These restrictions may void any transfer of shares, exercise of rights on the shares held, issuance of shares based on the restricted shares, dividend payments on the restricted shares, etc.
There are sanctions ranging from daily administrative penalty fees and fines to imprisonment that can be imposed on companies, limited liability partnerships and persons with significant control who fail to comply with the reporting requirements under the PSC Regulations.
Furthermore, the PSC Regulations mandate that a foreign company or limited liability partnership that is a shareholder or partner in a company or limited liability partnership provide details of natural persons who ultimately own or control the foreign company or limited liability partnership.
Central Bank of Nigeria’s guidance on ultimate beneficial ownership of legal persons and legal arrangements
The Central Bank of Nigeria (CBN) issued guidance to financial institutions on the procedure for identifying and verifying the beneficial owners of legal persons and arrangements in line with the 2022 CBN Regulations on Anti-Money Laundering, Combatting the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions) (the “AML/CFT/CPF Regulations”).
The guidance lists several red flags to help identify the beneficial owners of companies and legal arrangements, including:
2021 Regulations for Further Growth of Indigenous Capacity
The Minister of Petroleum issued the 2021 Regulations for Further Growth of Indigenous Capacity (the “Local Content Regulations”), which took effect on 26 February 2021. The Local Content Regulations provide that an indigenous company shall mean a Nigerian company formed and registered under the Companies and Allied Matters Act with at least 51% of its shares beneficially owned by Nigerians. It is unlikely that a party could successfully challenge this beneficial ownership requirement in a Nigerian court.
As a result, to qualify as a Nigerian company, at least 51% of the beneficial ownership of a company's shares must be held by Nigerians. Nominee shareholders will not satisfy this requirement. Moreover, the Nigerian Content Development and Monitoring Board (NCDMB) may require the company to provide proof of the beneficial ownership of its shares.