and acquisition has been widely acclaimed by scholars and professionals in
business as the most desirable and effective strategy to revive the difficult
situations facing Nigeria
economic climate. The situation is so terrible that organizations had to turn
around and adopt strategy to survive through this turbulent water. This research work has the objective
undertaking to examines, analyze and evaluate the effectiveness of merger and
acquisitions as a strategy for organizational survival in Nigeria and
investigates whether it can result to economic of scale and increase
profitability of the combined firms. To this end, questionnaire were
administrated to Oando Nigeria Plc and some few other organizations that
merged. The data and information collected were analyzed using simple tables,
frequencies and percentages. The findings of this research reveals that merger
and acquisitions brings about improve in the productivity of the emerged
organizations. The researcher is of the opinion that, based on the findings,
the recommendations made if properly followed, it will improve the activities
of merger and acquisition for the benefit of the government, proposing
organizations and the interested public at large.
TABLE OF CONTENTS
page - - - - - - - - - i
page - - - - - - - - - - ii
Declaration - - - - - - - - - - iii
page - - - - - - - - - iv
Dedication - - - - - - - - - - v
Acknowledgement - - - - - - - - vi
Abstract - - - - - - - - - - viii
of content - - - - - - - - - ix
CHAPTER ONE - Introduction
1.0 Background of the study - - - - - - 1
1.1 Historical Background of Oando Nigeria Plc - - - 3
1.2 Statement of the general problem - - - - - 5
1.3 Objective of the study - - - - - - - 6
1.4 Significance of the study - - - - - - 8
1.5 Research question - - - - - - - 9
1.6 Statement of hypothesis - - - - - - 10
1.7 Scope and limitation of the study - - - - - 10
1.8 Definition of terms - - - - - - - 12
CHAPTER TWO - Review of Related
2.0 Introduction - - - - - - - - 14
2.1 Merger and Acquisition definitions - - - - - 14
2.2 Types of Merger - - - - - - - - 16
2.3 Strategies for business survival - - - - - 18
2.4 Motive behind merger and acquisition - - - - 19
2.5 Reason for merger and acquisition preference
investment in new business generated
from scratch - - 23
2.6 Procedure for effective merger - - - - - 26
2.7 Method of financing merger - - - - - - 28
2.8 Merger and acquisition investment banking - - - 31
2.9 Merger and acquisition market place
difficulties - - 32
2.10 The effect of merger and acquisition - - - - 35
2.11 Legal issues in M & A - - - - - - - 36
2.12 Regulation of M & A in Nigeria - - - - - 37
2.13 Summary of the review - - - - - - - 40
3.0 Introduction- - - - - - - - - 42
3.1 Area of study - - - - - - - - 42
3.2 Research design - - - - - - - - 43
3.3 Research population - - - - - - - 43
3.4 Sample and sampling technique - - - - - 44
3.5 Data collection instruments - - - - - - 44
3.6 Data collection method - - - - - - - 46
3.7 Validity and reliability of the instrument - - - - 46
3.8 Administration of research instruments - - - - 47
3.9 Techniques of data analysis (mode) - - - - 47
CHAPTER FOUR - Presentation and Analysis
4.0 Introduction - - - - - - - - 49
4.1 Respondent characteristic and classification - - - 49
4.2 Presentation and Analysis of data - - - - - 50
4.3 Testing of hypothesis - - - - - - - 58
4.4 Summary of findings - - - - - - - 60
CHAPTER FIVE - Summary, Conclusion and
5.0 Introduction - - - - - - - - 62
5.1 Summary - - - - - - - - 62
5.2 Conclusion - - - - - - - - - 65
5.3 Recommendations - - - - - - - 65
Bibliography - - - - - - - - - 68
OF THE STUDY
increase in oil boom in the 70’s was an era of huge and expensive prospect of
doubtful utility and viability. However, the heavy dependence on oil and
imported input rendered the Nigerian economy to be sensitive to external shocks
with the collapse of the world oil market in the mids 1981, an economic crisis
emerged in Nigeria, various control measures were put in place in order to
correct the disturbing situation between 1982 – 1985 but these measures failed
to deal effectively with the fundamental economic and financial problems
confronting the economy which was deteriorating.
nation began to face a situation of persistence and deteriorating balance of
payment problem, the external debt continually rise, the emotion of
international credit worthiness and the acute shortage of raw materials and
consumer goods, as agriculture suffered and severely, neglected, the country
(Nigeria) was at the point of collapsing.
the above circumstances, there is need for national economic reform which the
federal government eventually came up with Structural Adjustment Programme
(SAP) in 1988 as a strategy to end the deformation of the nation economy and
achieve a turn around in the fortunes.
current global economic depression facing the world has been described by the
world economic and financial experts as the longest and deepest depression in
the post war period. Major industrial developed countries share in this
performance characterized by declining growth rate, high inflationary pressure,
increase in number of unemployment and this trend had serious adverse effect on
the economic of developing countries of which Nigeria is included.
present development is quite affecting a substantial number of Nigeria
contemporary business most of them are on the path of decline, leading to
folding up of some companies and many others laying off their staff and
equipment as a result of operational hardship with lack of ability to expand
and decline in sales volume as well as profit.
the present difficult situation in the Nigeria businss environment. There
is need for businesses to be re-structured for survival in response to changes
that is occurring in the economic environment either a company decide whether
to acquire, merge or sell part or whole of its existing business thus, given
birth to a stronger, bigger and more profitable outfit that is capable of
surviving amidst strong competition.
BACKGROUND OF OANDO NIGERIA PLC
Plc commence its business operation as a petroleum marketing company in Nigeria
in 1956 under the name “ESSO West Africa Incorporated” a subsidiary of Export
Corporation of the USA. In 1969, the company was incorporated under Nigeria laws as
“ESSO standard Nigeria Limited. In 1976, the Nigeria Government brought ESSO
interest and thus, became the 100% owner of the company. The company was then
rename “Unipetrol Nigeria Limited”.
On 1st March, 1991
the company became a public limited company and was known as Unipetrol Nigeria
Plc in the same year, 60% of the company’s shares was sold to the Nigeria public
under the first phase the then privatization exercise and the company was
quoted on the Nigeria
stock exchange in February 1992.
2000, under the 2nd phase of the Federal Government of Nigeria’s
privatization programme, ocean and soil services limited became a core investor
by acquiring 305 of the Federal Government’s 40% equity stock in the company,
the remaining 10% was sold to the Nigeria public. The investment in
the then Unipetrol Nigeria Plc by Ocean Oil Services Limited was with support
of its International Technical Partners Compania Espanola De Petroleos (CESPSA)
who are currently 2nd largest oil group in Spain and ranks among the
top 10 oil group in Europe. CEPSA is a fully Integrated Petroleum Company
involved in exploration and production, petrochemicals natural gas, trading,
refining, distributing and marketing.
August 2002, the company acquired Agip Petrol’s 60% stake of Agip Nigeria Plc,
the sale of the 60% interest of Agip Petrol International was the result of an
international bid conducted by Agip petrol international B.V with the
assistance of an international adviser during which Agip Petroleum
International selected to them Unipetrol Nigeria Plc following the acquisition
of Agip Nigeria Plc the company was again i.e. branded to Oando Plc in 2003 and
emerged as Nigeria
2nd largest company in the downstream sector of the oil industry
with 15.64% market share.
OF THE GENERAL PROBLEM
to the present economic situation of the country (Nigeria), report indicated
that many Nigeria businesses and corporate organizations have closed up while
many more may soon close up, even those that have survived, it has been a
mergical survival and they are operating far below installed and optimum
productive capacities leaving none in doubt that the situation is bad enough,
the following problems are notice.
There is need to note the fact that many of
this organization that are depressed situation can either still be acquired or
merged with more prosperous and strong enterprise. In other word, an
alternative to this ugly economic woe in
the country should have been for companies to come together and continue
through merger or acquisition.
There is overextension which tend to make the
organization fuzzy and unmanageable. There is manager’s hubris, overconfidence
about synergies form merger and acquisition which results in overpayment for
the target company.
There is negative reactions from company’s
employees, bankers, suppliers, customers and other which make the process by
which a company is bought or sold prove difficult, slow and expensive. Thus,
they are not sold as often as they might or should be.
Multiple listing service concept has not been
applicable to merger and acquisition due to the need for confidentiality.
There is lack of proper method, apparatus and
techniques for efficiently executing merger and acquisition transactions
without compromising the confidentiality of thee parties involved without
unauthorized release of information.
Lack of good recording keeping of incomes
from business undertakings, mostly attributed to illiteracy and in other cases,
a deliberate attempt to evade tax is also a problem.
OF THE STUDY
business is embarked upon without a set of objectives to be accomplished.
Merger and acquisition are common features of modern commercial sense. Hence,
the intended objectives of conducting this study are as follows:
To examine the economic reasons behind above
phenomenon and in particular to look into how organization in both private and
public sectors of Nigeria
economy have been surviving under merger and acquisition.
To analyze the economic and social economic
of scale associated with operations, costs of company related to theories and
revenue stream. Thus, increasing profit, market share etc by absorbing a major
competitor and increasing its power to set prices.
To determine the effectiveness of merger and
acquisition as a strategy for organizational survival in Nigeria
Designed to smooth the earning results of a
company which over the long term smoothes the stock price of a company, giving
conservative investors more confidence in investing in the company.
To analyse the social, political, economic
and fiscal problems encountered by business organization with regards to the
policy of merger and acquisition in Nigeria.
To develop ways or means by which some of the
problems which are encountered in the realization of the proceeds from the use
of the proceeds improved.
Te study attempt to investigate its strategic
functions for improvement in productivity and profitability of Oando Nigeria
It is also hope that the recommendation made
if well studied and applied, could help business organization particularly
Oando Nigeria Plc, in attaining her financial goals efficiently.
OF THE STUDY
researcher hope that at the completion of this study, it will contribute
immensely to the existing literature on business organization and Oando Nigeria
Plc in particular towards advancement of knowledge in thee area of business
merging, other corporate bodies in Nigeria will also find the findings and
recommendations useful especially those that are hit by the present economic
woe and are considering closing down a the only option.
and its agencies that arte establish to regulate and approve merger and
acquisition proposal will also find this research work very beneficial
especially in enhancing their operations.
research work also intends to serve as a good reference material for learning
among students of various institution of higher learning, and other researchers
in the area of merger and acquisition in field of business administration and
management which is the bane of economic development of the country.
this research work to be successful certain question has to be answer in
request to the contributions of merger and acquisition to organizational
survival in Nigeria.
What is the impact of merger and acquisition
to Nigeria economy?
How can private and public organizations
survived under the merger and acquisition?
Would merger and acquisition provide social
economic of scale?
Does merger and acquisition solve the depressed
situation of economic woe in Nigeria?
Can merger and acquisition add significant
value of the firm’s shares?
to Egejule and Ogwo (1990). Hypothesis is a tentative and testable explanation
usually in a declarative form of the relationship between variables either
specific or general.
merger and acquisition does not bring about improvement in market performance.
merger and acquisition bring about improvement in market performance.
merger and acquisition does not lead to increase in profitability of the
merger and acquisition lead to increase in profitability of the combined firms.
AND LIMITATION OF THE STUDY
understand a research project of this nature, the scope is normally defined
with respect to geographical and time dimension. This research work is
concerned with the he general effect of merger and acquisition as strategy for
organizational survival with respect to Oando in Nigeria Plc. 2007 -2008.
is a common knowledge that empirical studies in business organization yielded
results which have to be taken with the proverbial “pinch of salt” as a result
of poor data base. In this regards, the difficulties experiences is ranging
Some of the organizations that consummated
merger and acquisition are not willing to release such information saying that
such information are classified document.
The research is limited to the nature of te
topic itself, it is so broad.
The research is constraints of non-availability
of all relevant data and non-possibility of studying all consummated mergers
and acquisition in Nigeria.
Financial constraint, due to nature and age,
the researcher faced with the high cost of transport to move from one place to
another where data and relevant information related to this topic could be
Finally, the reluctant and incorporate
attitude of respondents to questions is yet another. Limiting factor to this
the above mentioned limitations and many other unmentioned, the information
were confidential and the study has been systematically carried out devoid of
any bias and in line with the earlier stated objectives.
1. Merger and Acquisition (M & A): A merger is an arrangement by which all
the assets and resources of two or more companies are brought together under
the control of one company which is owned jointly by stockholders of the
is the whole transfer and control of assets, liabilities, employees, management
technical relationship and expert etc of one corporation to another.
2. Economic of Scale: This refers to the fact that the
combined company can often reduce duplicate operational costs relative to
theoretically, the same revenue strum, thus increasing profit.
3. Synergy: This refers to better use of
complementary resources. (i.e. 2 + 2=5).
4. Risk Diversification: This is the
situation where a company which is in a strong position within its own market
either in terms of cash flows or market share, decides to extends its influence
by acquiring another company usually in a different line of business, result to
a wider product range.
5. WOE: A long trouble confronting
6. Cross Selling: A company buying a stock
broker could then sell its products to the broker’s customers, while the broker
can sign up the company’s customers for brokerage accounts.
7. Manager’s Hbris: This refers to
manager’s overconfidence about expected synergies from M & A which results
in overpayment for the target company.
8. Anti-Trust Cycle: Is a regulatory
device that analyze the impact of merger on market and to control monopolistic
situation and other trade restriction activities that lead to adverse
implication for an economy.
9. (NEPD):National Economic Policy and
10. CAMA: Company and Allied Matter Act.