In the years following the COVID-19 pandemic, Nigeria saw significant growth in M&A activity across different sectors, including technology (particularly startups), financial services, telecommunications, manufacturing, consumer goods, and oil and gas. However, in 2023, M&A activities encountered challenges stemming from economic and political factors. These challenges included cash shortages earlier in the year, general elections, fluctuating foreign exchange rates, rising inflation and the removal of fuel subsidies, which negatively impacted the economy. Nevertheless, among these challenges, several significant deals emerged, encompassing both local and cross-border businesses.

In 2023, the startup technology, financial services and oil and gas sectors were popular in Nigeria’s M&A transactions. Cross-border acquisitions also continued to play a role in the M&A landscape, as evidenced by UAE-based cryptocurrency exchange Blockfinex’s acquisition of a 100% stake in Fluidcoins, a Nigerian cryptocurrency startup providing payment solutions for African businesses.

The technology industry and financial services, as well as oil and gas, remained prominent industries for M&A deals in Nigeria.

In the oil and gas sector, a significant transaction was Oando Plc’s acquisition of 100% stake in Nigerian Agip Oil Company Limited from Eni.

In the energy sector, Africa Finance Corporation acquired a 100% stake in Pecan Energies AS (formerly Aker Energy AS) from Aker ASA, a Norwegian Industrial Investment Company, and The Resource Group TRG AS, while Verod Capital exited Daystar Power Group to Shell Plc.

Key transactions in the financial services sector included Access Holdings’ acquisition of a majority stake in Finibanco Angola S.A and Verod’s divestment of its minority stake in Central Securities Clearing Systems Plc in July 2023. In September, Fidelity Bank Plc announced that it had completed its 100% acquisition of Union Bank UK, a subsidiary of Union Bank Plc.

Transactions in other sectors included the logistics sector, with Haul247, a platform for connecting businesses to haulage and warehousing assets raising the sum of USD3 million in a seed funding round. Moove, the mobility tech startup supply partner for Uber in EMEA raised USD16.8 million in financing from Emso Asset Management to aid its UK operations launch. Furthermore, in January, DriveMe, a mobility startup acquired a 100% stake in Go! TwentySix, a valet service provider in Lagos.

In the fast-moving-consumer-goods sector, AfricInvest acquired a minority stake in Justrite Superstores, a leading Nigerian family-owned retail department store. Aruwa Capital Management also invested USD2 million in Fastizers Food, a female owned, indigenous manufacturer of snack foods and confectioneries in Nigeria.

The cryptocurrency sector also witnessed its first acquisition as Blockfinex acquired a 100% stake in Fluidcoins, a Nigerian cryptocurrency startup that provides crypto/web3 payment experience and infrastructure for African businesses.

In the technology sector, Qualified – a technical skills assessment platform – was acquired by Andela, a global job placement network for software developers for an undisclosed figure in March 2023.

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.

Share Acquisition

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).

Private Placement

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.

Takeover

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.

Asset Acquisition

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:

• the Federal Competition and Consumer Protection Commission (FCCPC), which is the agency responsible for merger control and antitrust-related issues;
• the Securities and Exchange Commission (SEC), which is the regulator of the capital markets and is involved with M&A involving public companies and their subsidiaries; and
• sector-specific regulators.

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. 

Notification Threshold

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 USD920,000); or (ii) the annual turnover of the target undertaking in, into or from Nigeria equals or exceeds NGN500 million (approximately USD460,000).

Merger Reviews

First phase

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.

Second phase

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:

• the Nigerian Labour Act;
• the Pensions Act;
• the Industrial Training Fund Act;
• the Employee Compensation Act; and
• the Trade Unions Act.

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:

• a statutory right of first refusal (in addition, a company requires the prior approval of all its shareholders to sell assets having a value of more than 50% of the total assets of the company); 
• mandatory tag-along rights;
• additional exemptions for financial assistance to a company where:
1. the assistance is arranged in pursuance of a court order under a scheme of arrangement, scheme of merger or any other scheme or restructuring; and
2. the assistance is given as part of a larger purpose of a company and in good faith in the interest of the company, and the principal purpose for which it is given is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of shares in the company or its holding company; and
• share buy-back provisions.

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: 

• the registration of all derivatives contracts with SEC before being introduced on an exchange; the registration process involves disclosing certain information, including:
1. risk protection mechanisms; 
2. target investors for the derivatives product;
3. trading infrastructure to be deployed by the exchange for surveillance, trading and pricing information; and
4. assessment of the product’s susceptibility to manipulation. 
• the exchanges to report to SEC participants or clients that own up to 5% or more of total open interest of a particular contract;
• the exchanges to notify SEC on position limits, methodologies and rationale used for determining the limits;
• market participants to disclose information, when needed, on their trading and clearing activities and make quarterly disclosures on outstanding derivatives exposure from proprietary positions to SEC and in their quarterly and annual financial statements;
• participants to provide full disclosure of contract specifications and accompanying risks to their clients before accepting orders; and
• all OTC derivatives to be reported to a trade repository or an exchange.

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:

• An application for authority to proceed with a bid must be filed with SEC within three business days of the triggering event.
• SEC will grant authority to proceed, which is valid for three months, subject to further renewal for a maximum period of one month.
• The bid will be registered with SEC and subsequently despatched to each director and shareholder of the target company, and SEC.
• Dissenting shareholders are to be notified within one month of the other shareholders’ acceptance of the bid, allowing them to either elect to be paid in the same proportion as consenting shareholders or to have their shares valued.
• Within 20 days of notifying the dissenting shareholder(s) of the election, the acquirer will pay the target company the consideration that will be paid to the dissenting shareholders should they make an election.
• The dissenting shareholder(s) can either elect to be paid in the same proportion as the consenting shareholders or elect to have their shares valued. Otherwise, if within 20 days, the dissenting shareholders do not make an election, they will be deemed to have accepted to be paid the same as the consenting shareholders.
• If the dissenting shareholder(s) elect to have their shares valued, the acquirer will apply to court to determine a fair value for the dissenting shareholders’ shares. If the acquirer fails to apply to the court within 20 days after paying the consideration for the dissenting shareholders’ shares to the target company, the dissenting shareholder(s) may apply to the court for the same purpose within a further period of 20 days.
• A schedule showing details of the target’s shareholders who have accepted the offer and the volume and value of their respective shares, and evidence of payment of the consideration to the shareholders must be filed with SEC within seven days of the offer.
• SEC will undertake a post-takeover inspection within three months after the registration of the bid.

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:

• directors should promptly disclose any “real” or “perceived” conflict of interest that they may have by virtue of their membership of the board of directors;
• a director may not be present when any matter in which they have an interest is being decided and should not seek to participate in or influence any discussions or negotiations relating to that matter; and
• if any question arises before the board of directors as to the existence of a “real” or “perceived” conflict, the board of directors should by a simple majority determine if a conflict exists (the director or directors potentially involved in the conflict of interest should not be present during any discussion or voting on the issue).

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: 

• act at all times in what such directors believe to be the best interests of the company as a whole so as to preserve the company’s assets, further the company’s business, and promote the purposes for which the company was formed, and in doing so, have regard to the impact of the company’s operations on the environment in the community where it operates; and 
• have regard for the interests of the company’s employees in general and the interests of the company’s members.

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.