MERGER AND ACQUISITION: A NEW TREND OF FINANCIAL MANAGEMENT IN NIGERIA

TABLE OF CONTENTS

CHAPTER ONE

1.0              INTRODUCTION

1.1       BACKGROUND OF THE SUBJECT MATTER

            The subject matter of merger an acquisition first emerged in the Nigeria capital market in 1983 and it has become charged with controversies and conflicting view as a young and developing economy, the Nigerian economy environment was not prepared for the intricacies of merger and acquisition, which are generally considered the problem of mature countries.

            The impact of global economic depression and in particular the glut in the international oil market, caught up with the Nigeria economy and its industries and corporation one of the industries survival strategies was merger and acquisition plans.

            Merger imply combination or fusion of two or more formerly independence business units into one organization with a common ownership and management. Acquisition on the other hand includes all business and corporate organizational and operational devices and arrangement by which the ownership and management of independently operated properties in business are bought under the control of single management.

            Accordingly therefore, this term is used n changeably with mergers and well know as the term mergers and acquisition is to lawyers, accountants and businessmen generally, it was never used neither was it defined in the company Act of 1968”

            Speared on by tough Luck and the encircling whiplash of the economic situation Nigerian corporation skyline is fast undergoing a change.

Top company executive, who have suffered out of heart burns under the scouring heat of attempting to prop up sagging turn over figures and the flat ball own ballooning bank overdraft are now able to solve these problem which appear impossible one such solution being mergers and acquisition.

            It is a word now gaining prominence and toping the agenda of company boardroom meeting a company’s team up to service the economic situation.

            With these developments, there arose many unresolved problems in relation to the accounting, atomic, legal and regulatory aspects of any definite statement; with wide range view emanated according is the varying prospecting of those concerned. In this type of sceneries, it expedient that something must be done about it. This is the objective of this research in view of foreging discussion, this study shall also consider the commercial objective of merger and acquisition, among which is achieved cost technology or capture the market of the target company, or to affect the reorganization o group of associated company, or so as to achieve tax advantage to the same devise cold be resorted to merger and acquisition could also be used to gain control of company or to boil out an oiling business so as to avert redundancy.

1.2              PROBLEMS ASSOCIATED WITH THE SUBJECT MATTER

Mergers and acquisition scheme is a way of pulling out of oiling company from the woods, it is also away of making a growing fir even bigger. Unfortunately the mere existence of this term is the dictionary of firm is not enough for the fulfillment of their purpose.

Mergers and acquisition, scheme although used in the advance country of the world notably American and United Kingdom is virtually new in Nigeria. The number of firms that have engaged in land credence to this. What is the role of mergers and acquisition in the economic and corporate realization of firms?

Although most firms are not growing why have thy not resorted to mergers an acquisition?

            There are certain reasons for this which sterm from the fact that the investor, managers and the general public are sufficiently experienced to appropriate are briefly as stated below.

v  To increase market power or share

v  To build on economic empire.

v  To gain promotional projects

v  To expand production without price reduction

v  To acquire capacity at reduced price

v  To obtain real economic of scale.

v  To obtain monetary economic of scale. Etc.

1.3       THE IMPORTANCE OF STUDYING THE AREA

            Merger and acquisition scheme is a very new kind of business arrangement in Nigeria, though it has been in use in United Kingdom and united state of American for decades. It was introduce into Nigerian capital market as a result of the dwindling economic fortune of the country.

            With scarcity of foreign exchange resources, it become increasingly difficult to purchase new capital equipment and therefore, company wishing to expand or diveste their operation were compelled to seek out oiling company with suitable plant and infrastructure to acquire.

            There are company which only be glad to be believed out willing purchaser, this absolving them of liability to their bankers, ensuring labour retention and with shareholder ending up with some financial consideration for their shares. 

“The fortune of many founder owned companies tends to decline with the demise of the founder or their successor or the off spring many not have the technical skill or are unwilling to purchase management exercises. These successors could sell this company to willing purchase and there by presence jobs and help sustain the economy.

            In view of the forgoing and the man advantages of mergers and acquisition which may look simple from outside. The study will also look at the pros and cons o mergers and acquisition management of post mergers situation, after which recommendation will be proposed for the problems encounter in mergers and acquisition scheme.

1.3              DEFINITION OF IMPORTANT TERMS

Bankrupt:  A state under which some one is unable to pay his debt as and when they fall due.

Capital Market: Is a collect of financial institutions set up for granting of medium and long term loans such as government securities, market for corporate bodies market for cooperate share and market for mortgage.

Capital Budgeting: Is a statement of the firms planned investment generally base upon estimate of future sales, cost of production need and available of capital.

Insolvency: The condition in which a firm or individual liabilities exceeds its assets.

Stock Exchange:  The fall in value of assets due to usage and or passage of time

Dividend:  profit of a company divided by among the shareholders

Mergers:  is a combination of fusion. It could be two or more formerly independent business unit into one organization wit a common ownership and management.

Acquisition: is where by all business an corporate organizational and operational devices and arrangement by which the ownership and management of independently operated properties and business are bought under the control of single management.

Joint Stock: where two or more person or companies agree to share in some trading adventure.