At the onset of the pandemic, the pace of deal activity was negatively affected, particularly between 2019 and 2020. However, 2021 was a record-breaking year for M&A activity globally compared to the level of activity pre-COVID-19. According to PWC, the number of deals announced globally exceeded 62,000 which was an increase of about 24% from 2020. Nigeria was not left out, as many more deals were recorded in 2021 than in the previous 12 months.

In 2021, the technology sector witnessed a significant number of deals, with Nigerian start-up tech companies raising over USD1.7 billion which was approximately 60% of the total deal value for African tech start-ups. A notable development within the African technology industry in 2021 was the emergence of seven tech unicorns, three of which are Nigerian companies – Andela, Flutterwave and Opay.

The key industries that experienced significant M&A activity include the start-up technology space, including fintech, agritech, insurtech, edutech and healthtech companies.

More recently, there has been a lot of activity within the oil and gas sectors. Notable transactions include Africa Capitalworks’ acquisition of a significant equity stake in Dorman Long Engineering Ltd; the acquisition of Mobil Producing Nigeria Unlimited’s offshore shallow water business by Seplat Energy; and TNOG Oil & Gas Limited’s (a related company of Heirs Holdings and Transcorp) acquisition of 45% participating interest in Nigerian oil licence OML 17 and related assets from Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and ENI.

The retail sector also witnessed some activity with notable transactions like Shoprite International’s divestment of its equity stake in its Nigerian subsidiary; Tiger Brand Limited’s divestment of its significant minority stake in UAC of Nigeria Plc; and Africa Capital Alliance’s acquisition of a 31% stake in Food Concepts Plc from Development Partners International.

Also notable within the telecommunications and entertainment sector is Mwendo Holdings BV’s USD182 million acquisition of Blue Lake Ventures Ltd and I-web Inc’s acquisition of 100% stake in Tingo Mobile Plc.

In Nigeria, most acquisitions of private companies are effected by way of 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 will require 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 will be required.

Share Acquisition

A share acquisition will generally involve the acquisition of some or all of the shares of a target company. It could be between an acquirer and the company if it involves a subscription for shares. Otherwise, it will be between the acquirer and the relevant shareholder(s) of the target company, if a transfer of shares is envisaged. It could also be a mix of share subscription and share transfer, in which case, the acquirer will contract with the target company and the selling shareholder(s).

For public listed companies, shares could either be acquired via the relevant securities exchange, a 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 selected investors via private placement provided that the prior approval of the Securities and Exchange Commission and not less than 75% of the shareholders of the company has been obtained.

Takeover

An obligation to make a mandatory takeover offer will arise where (i) a person or group of persons acquires shares that represent 30% or more of the voting rights of a public company, or (ii) where a shareholder, together with other persons, holds shares representing between 30% and 50% of the voting rights of a public company and acquires additional shares in the company.

Generally, the structure that dealmakers will adopt will largely depend on several considerations including, tax implications, cost implications, complexity of the structures, time constraints, the size of the stake being acquired, strategic and business plans, the risk appetite of the acquirer, and regulatory constraints.

Asset Acquisition

An asset acquisition generally involves the acquisition of specified assets and rights and, in some cases, the assumption of certain liabilities of a company. Under this structure, the parties will need to identify and negotiate the specific assets which the buyer will acquire, as no assets will transfer to the buyer automatically. The seller in an asset acquisition is the company itself and not its shareholders. 

An asset acquisition is effected by an asset sale agreement which will contain the specific particulars of the assets being acquired, and the conditions under which they are being transferred or acquired. The parties must ensure that all formalities required for the transfer of specific assets are complied with, including regulatory consents, third-party consents and formalities for the transfer of assets such as land, employees and intellectual property rights.

Subject to the terms of the Articles of Association of the parties to an asset acquisition, the approval of 75% of their respective shareholders may be required for major asset transactions. A major asset transaction is defined under the Companies and Allied Matters Act 2020 as including (i) the purchase or other acquisition outside the usual course of a company’s business; and (ii) sale or other transfer outside the usual course of a company’s business, of assets which as of the completion date of the transaction are 50% or more of the book value of the company’s assets based on the most recently compiled 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 USD2million); or (ii) the annual turnover of the target undertaking in, into or from Nigeria equals or exceeds NGN500 million (approximately USD1million).

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 the 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. Some of 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, with the exception of senior management staff.

Transfer of Employees

In an asset sale, employees will not automatically transfer, as the consent of an employee is required prior to the transfer of their 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.

In 2021, the SEC published an amendment to its Rules on Mergers, Takeovers and Acquisitions, to establish its new role in mergers and acquisitions. Among other things, it extends the definition of affected transactions under Rule 1 of the extant rule to cover carve-outs, spin-offs and split-offs of a public company and, most importantly, it extends the transactions requiring the approval of the SEC under Rule 3 of the extant rule to stipulate that the approval of the SEC must be obtained prior to undertaking 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.

The approval required above will only be given if the SEC is satisfied that all shareholders are fairly, equitably and similarly treated and given sufficient information regarding the transaction. 

Consequently, mergers involving public companies and their subsidiaries may be subject to the purview of both the SEC and the FCCPC. Specifically, the SEC will focus on whether or not the merger meets the above-mentioned conditions, while the FCCPC will focus on whether the merger could substantially 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 the 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.

The SEC also mandates the disclosure of the particulars of holders of 5% or more of the shares of public companies to the 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.

While it may be possible for a company’s Articles of Association ("Articles") to prescribe a lower reporting threshold for shareholder disclosures, the company cannot by its Articles introduce a higher threshold. If a lower threshold is adopted, there will be no requirement for the company to give notice to the CAC as described above.

Other than the foregoing, the potential cost and timing implications of the regulatory processes involved in stakebuilding could be a potential hurdle. The Merger Review Regulations and Guidelines require parties to notify the FCCPC of a transaction resulting in the acquisition of a minority shareholding, which gives the acquirer material influence over a company. Under the Merger Review Regulations, the acquisition of 25% shareholding in a company raises a rebuttable presumption of material influence. A further transaction resulting in de facto or legal control will create a new relevant merger situation for which the approval of the FCCPC will again be required.

Dealings in derivatives are permitted in Nigeria subject to compliance with the derivatives market rules of the relevant exchange, the 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 as a consequence of 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.

The SEC Rules on Derivatives require the following: 

• the registration of all derivatives contracts with the SEC before introduction on an exchange, with registration involving –
1. certain information disclosures, including the risk protection mechanisms; and
2. target investors and trading infrastructure to be deployed by the exchange for surveillance, trading and pricing information and susceptibility of the product to manipulation; 
• the exchanges to report to the SEC participants or clients that own up to 5% or more of total open interest of a particular contract;
• the exchanges to notify the SEC on position limits prescribed, 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 the 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.

In addition, for listed companies, an application for the NGX's approval for an acquisition is required to contain the investment objectives of the buyer, the plan for management continuity and the post-acquisition profile of the target's management. The buyer's intention regarding the target's employees will also need to 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 which may exist. However, parties tend to limit information to employees generally, with the exception of 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, 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 in the course of a due diligence exercise. Such measures include the use of a clean team and data anonymisation.

Impact of the Pandemic on Due Diligence

As a consequence 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.

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, with the exception of 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 effect the transaction into its timetable. 

For mandatory takeovers, the Investment and Securities Act, 2007 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 the SEC within three business days of the triggering event.
• The 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 the SEC and subsequently despatched to each director and shareholder of the target company, and the SEC.
• Dissenting shareholders are to be notified within one month of the other shareholders’ acceptance of the bid, to elect to be paid in the same proportion as the consenting shareholders or have their shares valued.
• The dissenting shareholder(s) must accept, or otherwise, within 20 days, or they will be deemed to have accepted to be paid the same as the consenting shareholders.
• A schedule showing details of the target’s shareholders who have accepted the offer and evidence of payment of the consideration to them must be filed with the SEC within seven days of the offer.
• The SEC will undertake a post-takeover inspection within three months after the registration of the bid.

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 the contract of 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 (among others) the terms on which the shares are to be acquired. 

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. 

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, the SEC requires a bidder to file its evidence of source of funds at the point of applying for approval to proceed with the bid.

A bidder is generally at liberty to seek measures which it deems necessary to protect its interest in a deal. The type of security which a bidder is likely to get is largely dependent on the negotiation with its counterparty and its bargaining power. It is usual to have measures such as break fees, the quantum of which, parties are free to negotiate and agree upon. Other deal protection measures include matching rights and non-solicitation provisions. 

While there are no express statutory provisions prohibiting "force the vote" provisions and an agreement "not to shop" under Nigerian law, adopting these protective measures could conflict with a target’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 a definitive agreement for 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. 

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 of the target company. The terms of the undertaking will be negotiated and agreed upon by the relevant parties.

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.

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 the 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 the 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 the 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 the SEC during the application for the registration of a takeover bid. Financial statements are typically prepared under the GAAP or IFRS principles.

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 the company carries on business, 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 is 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 outside 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 management of 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 the company, to immediately notify the directors of such company in writing, specifying the particulars of the director's interest.

In addition, the Nigerian Code of Corporate Governance, 2018 ("the Code") recommends that:

• directors should promptly disclose any "real" or "potential" 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 situation should not be present during any discussion and 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 carries on business operations; 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 the 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 agitation of activists.

See 11.1 Shareholder Activism.

It is not uncommon for activists to seek to interfere with the completion of announced transactions.