Mergers As A Form Of Corporate Restructuring In Nigeria.
Today we take a deep dive into one of the forms of corporate restructuring in Nigeria, namely – Mergers.
A merger is the coming together of two businesses under one legal name. Companies merge to unify similar products, increase sales, and expand into new markets. Etc.
Section 92 (1) of the Federal Competition And Consumer Protections Act (FCCPA), 2018 provides that a merger occurs when one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole part of the business of another undertaking and can be achieved in any manner including through
i) the purchase or lease of the shares, an interest or assets of the other undertaking in question.
ii) the amalgamation or other combination with the other undertaking in question or
iii) A joint venture
Types of Mergers
A) Conglomerate merger – When companies from diverse industry or geographical regions join, it results in a conglomerate. In essence, it entails the merger of two businesses that are completely independent of one another or conduct unrelated commercial activity.
B) Horizontal merger -Simply put, a horizontal merger is the consolidation of two or more businesses that compete with one another and offer the same goods or services. Companies integrate horizontally to build a stronger organization with a larger market share.
C) Vertical merger – When two businesses merging their operations or offers at various levels of the same industry supply chain, this is known as a vertical merger. This is done to increase cost-saving synergies that come from combining with one or more supply firms.
Section 92(4) (a) and (b) of the FCCPA provides for categories of Mergers;
92(4) For the purposes of this Act –
(a) a ”small merger” means a merger with a value at or below the threshold stipulated by the Commission by regulations ; and (b) a”large merger” means a merger with a value above the threshold stipulated by the Commission by regulations.
Section 1 of the Notice Of Threshold For Merger Notification, 2019 provides,
“Pursuant to Section 93(4) of the FCCPC
1(1) A merger shall be notifiable before implementation if, in the financial year preceding the merger :
(a) the annual combined turnover of the acquiring undertaking and the target undertaking (combined figure) in, into or from Nigeria equals or exceeds One Billion Naira (N1,000,000,000.00); or
(b) the annual turnover of the target undertaking in, into or from Nigeria equals or exceeds Five Hundred Million Naira (N500,000,000.00)”
Hence, this sets a threshold for what can be considered a small or large merger.
Section 93 and 94 of the FCCPA 2019 also contains respectively, provisions with regards to the implementation, notification and approval of a merger by the commission and the consideration by the commission of the effect of a merger on competition.
Credit – Law Statistics, Forms of Corporate Restructuring, https://youtube.com/channel/UCvktkbfzZyGTjPb9sr8qZyQ
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