No. The Law has created thresholds to ensure that the Commission focuses on transactions with significant economic impact. Consequently the Commission only reviews those transactions that fall within the notifiable thresholds specified by the Law and the Rules and Regulations of the Commission;
FAQs for Mergers and Acquisitions (M&A)
M&A transactions can be complex and have significant implications for businesses and investors. This FAQ section provides answers to common questions about M&A processes, valuation, and regulatory considerations.
Does the Commission review every merger and acquisition that takes place in Nigeria?
What are the notifiable thresholds for M&A transactions?
All intermediate and Large Mergers i.e. Merger of parties with a combined annual turnover or assets of more than N1Billion are required to be notified to the Commission. Where the transaction is structured only as an acquisition, then any acquisition of shares or assets in a company with assets or turnover of more than N500Million is notifiable.
How does the Commission determine if parties meet the threshold?
The regulations provide that the sum of the combined assets or combined turnovers of the parties to the merger should be used in determining if parties fall within the threshold. If the combined assets or turnover of the parties exceed the set threshold in the SEC Rules and Regulation then the merger is deemed to have met the notification threshold. Note that, where both the turnover and assets meet the notification threshold, the Commission will use whichever is higher in determining the fee payable.
If a private company is to be merged with another private company, is there a need to file for the prior review and approval of the Commission?
Yes. The mandate of the Commission is to review and regulate mergers, acquisitions, takeovers and all forms of business combinations and affected transactions of all companies as defined in the Investments and Securities Act.
Why should a private company file with the Commission for the approval of a Merger?
The role of the Commission in relation to Merger review is not restricted to public companies. The consideration by the Commission when considering a merger is to first determine whether or not the merger is likely to substantially prevent or lessen competition by assessing the strength of competition in the relevant market. This is an economic determination separate from the Commission’s role of securities regulation.
Is notification mandatory or voluntary?
Notification is mandatory according to section 118 of the ISA for all notifiable mergers or mergers that meet the notification criteria. However, notification of small mergers with a threshold below the minimum threshold for N1Billion or acquisition of targets with assets or turnover less than N500Million are not mandatory and are only required where the Commission expressly demands.
How is notification made?
Notification entails the lodging of all relevant documents with the Commission and the payment of a filing fee and a processing fee. Parties to a merger must supply relevant documents as requested in the SEC Rules and Regulations. Only when all relevant documents have been submitted and notification fee paid will notification be deemed to be complete.
Are non-notifiable mergers reviewable?
It is not mandatory for merging parties to notify merger transactions that are below the prescribed threshold. Nevertheless, the Commission may ask parties to notify such a merger if the Commission has reason to believe that the merger could lead to substantial lessening of competition, public interest concerns and a position of dominance that needs to be reviewed.
What is an External Restructuring?
In line with the SEC regulation, an External Restructuring includes the restructuring of a group of companies and other related party transactions. The intention is to provide a fast track approach for mergers or business combination of entities within a group.
Will a carve-out, spin-off or other form of corporate restructuring which does not result in a merger fall within the category of External Restructuring?
No. the procedure captured in the Rules and Regulations of the Commission envisages a merger or business combination to be sanctioned by the Court. However, public companies undertaking any form of corporate restructuring which will result in a change in the business direction or operational policy of such company shall notify the Commission and obtain a no objection statement. Notwithstanding, it should be noted that where a carve-out, spin-off, or other form of restructuring results in an acquisition of shares or assets of a company operating in the Nigeria, the notification requirements discussed above will apply.
Why does the Commission only require notification of corporate restructurings such as carve outs from public companies?
The notification is in furtherance of the Commission’s investor protection mandate. In considering such transactions, the Commission considers whether all shareholders are fairly, equitably, and similarly treated and given sufficient information regarding the transaction. This duty does not extend to shareholders of private companies.
When will the Holding Company Exception in Section 118 (3) apply to a transaction?
The holding company exception applies to holding companies acquiring shares solely for the purpose of investment and not using same by voting or otherwise to cause or attempt to cause a substantial restraint of competition or tend to create a monopoly in any line of business enterprise. As an example, HoldCo indirectly holds shares in Target through SubA and SubB. Subsequently, HoldCo decides to consolidate its holdings with SubA by acquiring the shares held by SubB. This is a classic example of a holding company exemption.
What kinds of Acquisitions are regulated by the Commission?
Subject to the notifiable threshold, any direct or indirect purchase or assumption of ownership of a majority stake in the equity, or other share capital or of the assets of a target company in Nigeria which confers control of the target company or control of a line of business on the acquirer will fall within the Commission’s purview.