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CHAPTER ONE
1.0 INTRODUCTION
Merger and acquisition as a business combination cannot be over
emphasized. Merger and acquisition can either increase or decrease
the financial base of a firm. The most important thing is the
management team choices of adopting a proper concept that will
enhance better evaluation.
Generally, before a company merges together that is the predator
company and that of the target company they must be thoroughly
appraised using realistic models and method of appraisal. This study
attempts to highlights the survival and growth of Nigeria companies
especially the oil industry with specific concern on mergers and
acquisition scheme in Nigerian economy.
Where two or more autonomous companies come together under a
common control or where there is formation of a new company which
acquires the assets (and possibly the liabilities) of two or more
existing companies or on the other hand, where a company (holding
company) is taking over the voting share of another company
(subsidiary), a merger or acquisition has invariably occurred.
The current predicament in Nigeria calls for pulling together of
resources and it more efficient utilization for overall economic
rationalization, survival and growth. However, one of the instruments
to achieve survival and growth in business and companies that will
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have direct effect on the economy of the country is business
combination which may take the form of merger, acquisition,
absorption, consolidation etc. as regards the topic of this study, the
meanings of merger and acquisition are hereby defined below:-
Generally, the word merger implies the combination or fusion or
rather coming together of two or more formerly independent business
units into one organization with a common ownership and
management.
Merger is a form of business combination where two companies join
together with one being voluntarily dissolved without being wound up
by having its interest, resources, shareholders, asset, and liabilities
taken over by the other company.
In recent usage, merger is a special case of combination where both
merging companies join together on equal terms and at the same
time bringing under the control of a single management, the
management of two independently operated businesses.
Merger is the combination of two or more business units, which pull
or unite together their resources and interest with a view to achieving
a continuing mutual sharing in the benefits and risks that may occur.
Scientifically put, merger is the fusion of two or more enterprises in
which no new concern (entity) is created.
The word acquisition means taking over, therefore, acquisition
business means take over or purchase of business. Acquisition arise
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when a company purchases the business and undertaking of another
company where the acquired company retains its legal existence and
continues its business but assumes the status of a subsidiary
company to the acquiring company, which automatically becomes a
holding company.
Acquisition or take over business is the union of two or more formerly
independent businesses or firms under a single ownership
accomplished by the complete purchase of one companys stock by
another. The acquired company then ceases to be a separate entity
but a subsidiary of the acquiring company.
An acquisition is a business combination that is not a union of interest
but a purchase of interest. Acquisition is any business combination
that is not a merger. In which case, the shareholders of the acquired
party do not have a continuing interest in the combined entity but
instead sell their shareholding for cash or other non equity
consideration since they have no control over the business any
longer, as long as the parties are not combining on equal terms.
According to innocent okwuosa (2000) an acquisition is any business
combination that is not a merger.
1.1 HISTORICAL BACKGROUND OF ELF OIL NIGERIA LIMITED
Elf oil was incorporated as a private limited liability company on 20th
November, 1981 to engage in the business of marketing petroleum
products, lubricants and chemicals. The companys authorized share
capital on incorporation was 1,000,000 divided into 2,000,000
ordinary shares of 50k each.
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Right from this time (November 1981) the authorized share capital off
Elf Oil has been receiving increment. Up to June 2000 when the
merger took effect the share capital and increased to N600,000,000
divided into 1,200,000,000 ordinary share of 50k each out of which
300,000,000 divided into 600,000,000 ordinary share of 50k each
were issued and fully paid.
1.2 TOTAL NIGERIA PLC
Total Nigeria Plc was incorporated as a private limited liability
company on 1st June 1956 as total Oil Product (Nigeria) Limited to
market petroleum products throughout Nigeria.
In 1978, the company became a public limited liability company and
was granted a listing on the Nigeria stock exchange in April 1979,
after 40% of its equity capital was sold to the Nigerian Public in
compliance with the provision of the now repealed Nigerian
Enterprises Promotion Decree 1977( the NEP Decree 1977), the
companys authorized share capital on incorporation was N1,000,000
divided into 50,000 ordinary share of N20 each.
Right from 1956, the authorized capital of Total Plc has subsequently
received changes. From 1956 to June 1978, the authorized capital of
N1, 00.00 divided into 50,000 share of N20 each increased to N22,
500,000, capital divided into 1,125,000 shares. From October 1978 as
the shares kept on increasing, the per value was denominate to 50k
per share. Up to the year 2000, the authorized share capital to Total
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had increase to N112, 000,000 divided into 224,000,000 ordinary
shares of 50k each.
1.3 OBJECTIVES/PURPOSE OF THE STUDY
The study intends to examine the role of mergers and acquisition in
the survival and growth of Nigeria companies.
To investigate into business in which merger and acquisition
can be of greatest use in Nigeria.
To find ways of making mergers and acquisition attractive to
Nigeria companies
To show the benefits of mergers and acquisition to Nigerian
economic development.
To explore into the reason why Nigerian indigenous company
are not involved in mergers and acquisition and other related business
combinations.
1.4 SIGNIFICANCE OF STUDY
The study intends to provide a means of survival, growth for present
and future companies in Nigeria through the creation of awareness of
the research topic.
The knowledge of mergers and acquisition in business community as
a way out of financial distress will enhance the nations economic
development in terms of economic down turn and recommendations
made will be of immense importance to the companies of study.
The study will serve as a reference to student in the accounting
department of Delta state university, Abraka and other students
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carrying out further research on the topic and other related
disciplines. The study will add to the existing literatures on mergers
and acquisitions.
1.5 SCOPE AND LIMITATION OF STUDY
The research extensively covers the historical background of the
companys study, Total Elf, the state of the new company after
acquisition, the research instrument used i.e. primary source,
personal interview and secondary source, published information and
financial publications. More over, the research covers the
determination of the related business combination similar to mergers
and acquisition e.g. absorption, consolidation etc. the limitations of
the study include the following;- the cost of transportation to Total
headquarters in Victoria Island, typing and photocopying have
restricted the scope of the study areas of research work which could
adequately be covered.
The difficulties in getting many interviewers to clarify some points.
1.6 DEFINITION OF TERMS
The key term or word use in this study is hereby defined:-
Holding Company: A holding company is a company that has
another company that it controls.
Subsidiary Company: A company is a subsidiary if it is controlled
by a holding company.
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Authorized Share Capital: The capital stated in the memorandum
of association with which the company wishes to commence the
business.
Ordinary Shares: The shares of the owners of the company, on
which dividends are paid according to profit left after payment of
dividend on preference shares which attract fixed dividend.
Issued Shares: There are part of the authorized shares issued out
to the public for subscription.
Fully Paid: This represents the issued shares that have been fully
paid for by the public; that is, the nominal value on the shares has
been fully received by the company.
Par Value: this is the value at which a share is to be sold to the
public. It is otherwise means nominal value.
1.7 SUMMARY/OUTLINE OF STUDY
In summary, business combinations Is a means expansion, Growth
and acquisition are strategies of maintaining expansion, Growth and
profitability level in companies business. Merger acquisition and other
business combinations terms like consolidation.
Absorption, take over, pulling of interest, amalgamation etc, are used
to describe the business transaction between one firm and other.
However, they all identify technical meaning and are used
interchangeably.
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The companies of study TOTAL OIL and ELF OIL merged in the year
2000. With Elf Oil being dissolved voluntarily without being wound
up, in which TOTAL acquired all the assets, liabilities shares and
shareholders of ELF under the name TOTAL FINA ELF.
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REFERENCES
Ican Study Text (1988) pg 101 -200 PE II Financial Management,
Lagos May Associates
Innocent Okwuosa (2000): Group Accounts. Safe Publication Ltd,
Lagos.
Kam, Veron (1990): Accounting Theory 2nd Edition (New York, John
Wileg and Sons Inc.)
Mathur I. (1979): Financial Management, Macmillan Publication
Company Incorporation New York
Okwuosa I. (2000): Group Account Published by Arnold Consulting
Ltd, Martins Street, Lagos.
Pandey I.N (1990): Financial Management (New Delhi, Vikas
Publishing)
Jennings A.R (1990): Financial Accounting Manual, 2nd and 3rd
Edition Low Priced Book Scheme (ELBS) Published.
TOTAL FINA ELF, TOTAL /ELF 2001 scheme of merger 2001.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 INTRODUCTION
Mergers and acquisition are very common in the developed countries
like Britain and Unites State of America but are to be very prominent
in the scheme of events in Nigeria. However, it is now coming to the
awareness of Nigerias that, to achieve the objectives of probability
and growth among the key objectives of business concern, the
strategies of Merger, acquisition, consolidation, takeover, business,
absorption etc. must be developed and the effect of our cultural
background in terms of theory of assets ownership (who owns assets
and takes control) must be eradicated in order to consummate the
strategy of merger and acquisition.
In actual fact, growth has been a way of life for business units
virtually from the day business activities began in early times. Growth
can be accomplished either within the business unit or through
combination with accomplished companies either within business unit
or through combination with other business units, organizations,
merger, acquisition, absorption, take over, consolidation,
amalgamation.
2.2 CONCEPT OF BUSINESS COMBINATION MERGER
According to the companies Allied Matter Decree of 1990 (CAMD
1990) section 591, merger is any amalgamation of the undertaking or
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any part of the undertaken or interest of two or more companies or
the undertaken of one or more bodies corporate.
Pandey I.M (2000) defines mergers as the combination of two or
more companies unto one company
International Accounting Standard No. 22 (IAS 22) defines merger as
the uniting or pooling of interest of two or more business
An acquisition is defined by international accounting standard No 22
as a Business combination that is not a uniting of interest
Aamiakor in his paper mergers and acquisition defined acquisitions
as including all business and corporate organizational and operational
devices and arrangement by which the ownership and managements
of independently operated properties and business are brought under
the control of a single management. Examples of acquisition of
businesses are John Holt Plc acquire Haco Ltd 1963, Lever Brothers
Nigeria Plc and Lipton of Nigeria in Lever Brothers Nigeria and
Cheesebrough Product in 1988.
ABSORPTION
Absorption is a combination of two separate business entities in which
the business of one is transferred to another and the transferor (the
acquired company) voluntarily winds up or dissolves. An example of
business combination which can be described as absorption is the
combination of the companies of case of study. Total and Elf oil as
trading Total Plc takes over the assets and liabilities and operation of
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Elf Oil Nigeria limited and Elf Leases trading and UBA acquired STB
2005.
CONSOLIDATION
A consolidation is a form of merger according to Pandy I.M (2000) is
a combination where all companies are legally dissolved and a new
entity is formed.
A consolidation as a form of business and economics, a consolidation
is the union of two or more formerly business or firms into a third or
new firm under a single ownership.
Consolidation is most suitable to size business, operating on a
relatively small scale.
AMALGAMATION
Amalgamation is a business combination that involves small scale
business, where a holding company is usually established to acquire
all or a majority holding of the voting shares of the other business
which continue in existence as the subsidiaries of the holding
company.
2.3 CLASSIFICATION OF BUSINESS COMBINATIONS
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Various classification of business combinations have been made by
different authors but this write up will focus on two major
classifications which are:
Classification based on economic effect
Classification based on legal status.
CLASSIFICATION BASED ON ECONOMIC EFFECT
The extend to which a combination may produce economic gains or
effect depends on whether the business ventures of combining
partners are related or not. Therefore, the management of the
acquiring company should clearly define their organizational strategy
whether it is vertical, horizontal or conglomerate.
HORIZONTAL COMBINATION
This is a combination to two or more firms in the same business, in a
similar type of production and in the same manufacturing or
distribution level. For example, the 1985 merger of Nestle and
carnation where both companies manufacture food product.
VERTICAL COMBINATION
This is a combination of two or more firms in different stages of
production and distribution level. It is a line combination which can
take the form of a forward or backward integration.
FORWARD INTERGRATION
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Occurs if a company combines with its customer to move up towards
the ultimate market.
BACKWARD INTERGRATION
This occurs if a company combines with its supplier of materials that
will provide its basic impact.
CONGLOMERATE COMBINATION
Conglomerate combinations takes place between two or more firms
whose businesses are not directly related or whose products have
little or no resemblance to one another. This is done to reduce risk as
the business resources would be diversified. For instance, if a
company, the manufacturer of babies cloths combines with another
company of manufacturing textiles.
CLASSFICATION BASED ON LEGAL STATUS/FORM
The main categories to be discussed here are statutory mergers,
statutory consolidation, and sales of assets and lease of assets.
STATUTORY MERGER
Under statutory merger the merger company that is taken over by
another company ceases to exist as a separate entity. The
combination id based on a tax free exchange of shares where all the
assets and liabilities of the acquired company are assumed by the
surviving company.
STATUTORY CONSOLIDATIONS
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Under statutory consolidation, both firms merger into a new in and
both cease to exist as separate entity.
Shares of both companies are exchanged for sales of the new
companies where the new company assumes all the asserts and
liabilities of both companies.
SALES OF ASSETS
Under the sales of assets are company that sells all its assets to
another where in addition, the buying company may also agreed to
assume some or all of the vendor companys liabilities which the
purchase payment may be in cash, securities or combination.
LEASE OF ASSETS
Lease of assets have to do with renting out an asset like plant,
machinery equipment etc, for a long period of time, we can lease it
out to another asset (lessor) discontinues its operation; we can lease
it out to another company and thereby derive income from the rent,
which accrues under the lease. This situation is usually brought about
by persistent losses in the lessor company either through this
management or often in Nigeria context, through lack of raw
materials.
2.4 REASONS FOR MERGERS AND ACQUISITION
Numerous factors account for merger and acquisition in any business
sector irrespective of the constraints inherent in such
Sectors or ventures. Some of these factors which could be called the
reason for mergers and acquisitions are discussed below:-
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GROWTH
Expansion is a major object or business organization. In corporate
annual report, top management often lists growth among its primary
goals. Some companies believe that merging or booing an on going
concerns aids growth than breaking into or establishing a new market
which in reality helped the growth of some Nigerian companies e.g.
Lever Brothers Nigeria Plc , John Holt, Ltd.
FINANCING
The survival and progress of any business are determined by finance.
Firms with excellent growth potential may find it difficult to achieve
this potential as a result of lack of access to financing. In a situation
like this, it is reasonable for such firm to merger with cash rich or
highly liquid firm.
ECNOMICS OF SCALE IN OPERATION
Mergers and acquisitions may result in economics of scale in
operation in terms of saving human and material resources that is,
cost reduction in the area of ware housing, depot charges, site
utilization, personnel, planning and shipping. Moreover, allocations of
fixed cost over a large volume of sales and thereby obtain savings on
production cost by eliminating duplicative five costs leads to merger
and acquisition.
DIVERSIFICATION
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A company may merge with another company it is wished to diversify
in production, risks maturity and space which may be for securing
reasons.
AVIODANCE OF EXPENSES OF GOING PUBLIC
A privately owned company may combine with publicity owned
company to avoid the expenses of going public i.e. listing
requirements for its quotation in the stock exchange market and also
avoid the risk of under subscription.
COMPETITION
Elimination of competition sometime might be a concrete reason for
business merging or acquiring one another.
SYNERGY
Merger and acquisition in most cases, produces synergetic effect in
companies. In financial context, synergizing means that the combined
firms is doing better or are having improved profit than when they
where operating as separate entities.
TAKEOVER
Pandy I.M (2000) defined take over as obtaining control over
management of a company by another. It is like acquisition but under
the monopolies and restrictive trade practice Act, take over means
acquisitions of not less that 25% of the voting power in a company.
2.5 PROBLEMS ASSOCIATED WITH MERGERS AND ACQUISITIONS
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It should be apparent that the joining with or purchase of another fir
is merely a complex investment project. As such, it must satisfy the
same criteria and be justified on the same ground as any other
investment opened to a firm. The problems associated with mergers
and acquisitions are hereby discussed below:-
Government, shareholders, labour union and individual workers alike
may disapprove of a merger/acquisition because of fear if it leading to
creation of monopolistic powers, retrendement or being against public
interest. In order to evolve a strong and virile economic and financial
system in which its citizens would participate, government therefore
strive to eliminate imperfections and abuses that may be detrimental
to the orderly development of the political, economic and financial
system.
Perhaps the most difficult job in mergers/acquisitions is the handling
of people. The fact must be recognized objectively that people/groups
who are likely to be affected my mergers, their feeling and views
deserve understanding and mutual respect. Also, due to the limited
business vision and traditional confrontations between staff and
management, the job of notifying, briefing, education the non
management staff to secure their support is usually more difficult.
FINANCIAL DIFFICULTIES
This poses a lot of concern to the firm. The cost and the future
inflow, in ascertain cost, it is necessary to establish the alternative
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value to its owners of the firm under considerations for purchase.
That is the value from continued operation or selling out to third party
and this calls for a rather different techniques that the applicable to
normal internal investment projects.
EXISTENCE OF GOODWILL
The assets of going concern usually include goodwill i.e. the
reputation a business enjoys with its customers which gives the
business value above its physical assets value. Since goodwill is an
intangible assets, its valuation usually poses problem in situation of
merger/acquisitions.
PERSONAL PROBLEMS
Management and labour are often a critical a factor affecting the
profitability of the new company which variants through investigation
in view of their financial implications, firstly, the level of wages and
salaries in the firm will need to be compared to those rival and
neighboring firms as a re requisite to assessing long term labour
costs.
Other major financial problems are the setting of outstanding
obligations, the right of existing shareholders, minorities, etc, when a
firm is purchased which has redeemable preference shares,
debentures secured or insecure loans, banks overdraft etc. there is
often the opportunity and sometimes the obligation to redeem such
finance at the time of purchase. These complications do not exist in
the case of internal investments.
LEGAL FRAMEWORK
Merger arrangement is an exhilarating game and like all business
games, it is not a fun game. It has its players and special rules and
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there are both winners and losers. As in all games the rules change
with time and need.
Most regulatory procedures for mergers and acquisition are aimed at
the antirust implication of such merger arrangements. In other words,
preventing the incidence of such mergers becoming monopoly. Thus,
it would be rational to reject any proposal for the scheme if it is likely
to result in monopoly or to operate against public interest. Unlike USA
and the United Kingdom, there are no formal regulations on mergers
acquisitions in Nigeria. The companies and Allied Matters Decree 1990
merely stipulate the procedures and approval for reconstruction and
merger, these are highlighted below.
2.6 PROCEDURES AND APPROVAL FOR RECONSTRUCTION AND
MERGER
Where under a scheme proposed for a compromise arrangement or
reconstruction between five or more companies, the whole or any
part of the undertaking of the property of any company concerned in
the scheme (the transfer company) is to be transferred to another
company, the court may on the application of any of the companies
to be affected, order, separate meeting of the companies to be
summoned in manners as the court may direct.
If a majority representing not less than three quarter in value of the
shares of members, being present and voting either in person or by
proxy at each of the separate meetings, agree to the scheme, the
scheme shall be referred to as the Securities and Exchange
Commission for approval.
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If the scheme is approved, an implication may be made to the court
of one or more of the companies and the court shall sanction the
scheme, and when so sanctioned, the same shall become binding on
the companies and the court may by order sanctioning the scheme or
by any subsequent order make provision for all or any of the following
matters:-
The transfer to the transferee company of the whole or any part of
the undertaking and of the property or liabilities of any transferor
company.
The allotting or appropriation by the transferee company of any
shares, debentures, policies or other like interest in that company
which under the compromise or arrangement are to be allotted or
appropriated by that company to or for any person.
The continuation by or against the transferee company of any legal
proceedings pending by or against any transferee company.
The dissolution, without winding up of any transferor company. The
provisions to be made for any persons who within such manner as the
court may direct, dissent from the compromise or arrangement.
Such incidental, consequential and supplemental maters are
necessary to secure that the reconstructions or merger shall be fully
and effectively carried out.
An order under paragraph (IV) of subsection C of this secures that
the reconstruction or merger shall not be made unless:-
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The whole of the undertaking and the property assets and liabilities of
the transferor company are being transferred into the transferee
company, and of the court is satisfied that adequate provision by way
of compensation or otherwise have been made with respect to the
employees of the company to be dissolved.
Where an order under this section provides for the transfer of
property or liabilities, that property shall be virtue of the order, be
transferred to and become the liabilities of the transferee company,
and in the case of any property, if the order so directs, freed from
any charge which is by virtue of the compromise or arrangement to
cease to have effect.
Where an order is made under this section, every company in relation
to which the order is made shall cause an office copy there of to be
delivered to the commission for registration within 7 days after the
making of the order and a notice of the order shall be published in
the gazette and in at. least one national newspaper and if default is
made in complying with the provisions of this subsection, the
company and every officer of the company who is in default shall be
guilty of an offence and liable to a fine of N100.
In this section:-
Property includes property rights and powers of every description.
Liabilities includes duties of every description notwithstanding that
such right, power and duties are of a personal character which could
not generally be designed or performed vivaciously.
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Company where used in this section does not include any company
other than a company within the meaning of this decree
2.7 POWER TO ACQUIRE SHARES IF DISSENTING
SHAREHOLDERS
Where a scheme or contact involving the transferee of shares of any
class of shares in a company (transferor company) to another
company, whether a company has within 4 months after the making
of the offer in that behalf by the transferor company been approved
by the holders for not less than nine tenths in value of the share
whose transfer is involved (other than shares already held at the date
of the offer by or by a nominee for the transferee company, or its
subsidiary), the transferee company may at any time with 2 months
after the expiration of the said 4 months give notice in the prescribed
manner to any dissenting shareholder that it desires to acquire his
shares, and when such notice is given, the transferee company shall
unless on an application made by the dissenting shareholder within
one month from the date on which the notice is given the court thinks
fit be entitled and band to acquire those shares on the terms on
which, under the scheme or contract, the shares of the approving
shareholders are to be transferee company, provided that where
share in the transferor company of the said class or classes as the
shares whose transfer is involved are already held as the shares
whose transfer is involved are already held as aforesaid to a value
greater than one tenth of the aggregate of their value and that of the
share whose transfer is involved, the foregoing provisions of this sub
section shall not apply unless:-
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The transferee company offers the same terms to all holders of the
shares whose transfer is involved, or where those shares includes
shares of different classes, of each of them and;
the holders who approved the scheme or contracts besides holdings
not less than nine tenths in value of the shares (other than those
already held as aforesaid) whose transfer is involved, shall not be less
than three quarters in number of the holders of these shares.
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REFERENCES
Alvemeche, K.O (1996): Accounting for Managers and Acquisition of
Business in Nigeria.
Okwuoas I. (2000): Group Accounting Published By Arnold
Consulting Ltd, Martins Street, Lagos.
I.A.S (2002): International Accounting Standard, Paragraph 2, No 22
Jennings A.Z (1990): Financial Accounting Manual 2nd and 3rd
Edition, Education Low Priced Books, Scheme (ELBS)
Publisher.
Ammer C. (1977): Dictionary of Business and Economics Published
New York Free Press.
Mathur I. (1979): Financial Management. Macmillan Publication
Company Incorporations, New York.
Camp (1990): Companies and Allied Matters Decree Published by
Federal Republic of Nigeria
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CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 INTRODUCTION
This chapter examines the methodology of research to be adopted in
this research. The chapter presents a comprehensive description of
the means by which necessary data are obtained and the method
adopted for presentation and subsequent analysis of the research
data.
It will treat the various methods adopted in carrying out and
experiment the research hypothesis.
This chapter will further examine and X-ray various methods such as
the data collection method, sampling procedures, and plan, methods
of data analysis, and the procedures adopted in administering the
research questionnaire. Thus, the importance of this chapter cannot
be over emphasized.
3.2 RESEARCH DESIGN
This could be described as the blue print that allows a researcher to
provide solution to the problems to the study. The research design is
also serves as a guide to collect, analyze and interpret research
observations, it also defines the extent of generalization of research
findings.
For the success of this study, survey method which was defined by
Donald and Del (1972) as the systematic gathering of information
from respondent for the purpose of the population of interest. This
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will be used extensively to obtain broader ranger of information from
various categories of staff within the organization of TOTAL ELF NIG
PLC. Will be employed as the case study.
3.3 DATA COLLECTION METHOD
The data for this study will be collected through primary and
secondary sources to carry out this study to its logical conclusion.
PRIMARY DATA
This describes data obtained through primary sources such as survey
methods (questionnaire) et cetera. In this research study, the primary
sources to be employed include the use of well structured
questionnaires, and the conduct of personal interviews with the staff
of TOTAL ELF NIG. PLC.
SECONDARY DATA
This includes, data sourced through journals, textbooks, prepared
articles etc put differently, it describes data sources through not
originally prepared for that study. The data in the study were sourced
through journals written articles and textbooks on the topic.
3.4 RESEARCH INSTRUMENT
The research instruments used were the questionnaire and the
interview method.
QUESTIONNIARE
This questionnaire method describes a source or primary data in
which series well structure question are prepared and administered to
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a defined study population. These questions are characterized by
preciseness and are designed in simple and straightforward form.
This is designed in order to test various hypothesis formulated and to
obtain more information regarding the subject matter. The
questionnaire consists of two main sections (A & B). The section A
contains questions relating to the respondents biological data while
section B contains questions relating to the topic of the study. The
objective of this is to see how the respondents personal qualities
affect its answer..
For this study, close ended questionnaire method will be employed.
This is used as a supplement to the questionnaire, it is another
method of investigation furthermore, it can be used to obtain answer
that were impossible to be structured in the questionnaire. It also
gives opportunity for the people who cannot fill questionnaires to
express their views or and add their views or add their own quota
through their verbal expressions.
3.5 SAMPLING PROCEDURE
The sample: this describes the total number of element, which is
under discussion and from whom information are desired. The
population size was made up of the staff of TOTAL ELF NIG. PLC the
sample size chosen was 40 staffs.
3.6 VALIDITY OF DATA
Percinger N. (1973) validity is the degree to which a measuring
instrument measures what is designed to measure. Every measuring
instrument is designed for a specific measurement. It is correctly
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design. It measures what it is supposed to measure. If its design
process is affected by error, the measurement will not be correct. The
validity research instrument gives credibility to the research
instrument.
3.7 METHOD OF ANALYSZING DATA
In analyzing the data of the study, the chi square statistical technique
will be employed or applied.
The chi square statistical technique in testing the research hypothesis
by comparing the on served frequencies and the expected frequency
and then drawing a conclusion in view of the decision rule formulated
initially.
Chi square test statistical is given below
X2 (O-E)2
E
When E = summation
E = expected frequency
O= Observed frequency
Decision criterion for the validation of hypothesis
The value of chi square is computed from the above formula and the
appropriate null Hypothesis is started. The decision rule is that if the
computer value of chi square is greater than that table value at the
appropriate level of significance (5%) and degree of freedom, we
reject the null hypothesis (Ho) and accepted the alternative
hypothesis (Ho) and accept the alternative hypothesis.
29
The number of degree of freedom depends on the number of
constraints imposed on the data for a contingency table.
The degree of freedom is calculated on by using the formula.
Where df = (r-I) (c-I)
r= the number of rows
c= the number of columns
df= degree of freedom
3.8 LIMITATION OF METHODOLOGY
Despite the effort put into this research, some problems surfaces and
the gathering of data from this chapter. The problems include:
Some of the respondents failed to return the questionnaire at
the appropriate time.
Some respondents didnt return the questionnaire at all.
The inability to conduct interview with some of the top
management staff of the organization.
Financial constraints in carrying out the research work.
Time limitation
30
REFERENCES
Adams S.O (1997): Statistics for Beginners, Evans Brothers Ltd.
Ibadan.
Nnmadi A. (1996): Research Methodology in the Behavioral
Sciences, Longman Nig Plc. Lagos.
Lury D.A (1984): Data Collection in the Develop Countries, Great
Britain Oxford University Press, Ltd London.
31
CHAPTER FOUR
4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION
4.1 INTRODUCTION
This chapter attempts to highlight the data collected, through the use
of primary and secondary data in analyzing the validity and reliability
of the data.
A questionnaire method was adopted in collecting the respondents
response. Fifty five (55) questions were distributed but (40) forty
questions were returned.
4.2 ANALYSIS OF RESPONDENTS
Data presented and analyzed in the study were elicited from the
randomly selected respondents is indicated in the methodology.
In this section, an attempt was made to analyze respondents
responses to the questions structure forming the backbone of these
research findings.
To interpret and analyze the data, the use of number and percentage
is adopted as (40) forty and 10% respectively represents below is the
analysis of the respondents profile.
32
Table 4.1: Sex of Respondents
Sex Number of respondents Percentage (%)Male
Female
30
10
75
25Total 40 100
Table 4.1 shows that 75% of the respondents are male, while 25% of
the respondents are female.
Table 4.2
Department Number of respondents Percentage (%)finance
technical
personnel
accounts
audits
5
2
3
10
20
12.5
5
7.5
25
50Total 40 100
The analysis in table 4.2 shows that of the total population sampled,
(40) among various departments, the audit department constitute the
largest population of 50%, Account department 25%, finance 12.5%,
personnel 7.5% and technical department 5%.
33
Table 4.3: Status of Respondents
Status Number of
respondents
Percentage
(%)Senior executive
Management staff
Junior staff
10
20
10
25
50
25Total 40 100
Table 4.3 shows the status of management staff constitute the largest
population of 20 (50%) of the staff, while senior executive is 10
(25%) and junior staff is 10 (25%).
Table 4.4: Age of Respondents
Sex Number of respondents Percentage
(%)25-34 years
35-44 years
45 years and
above
10
25
5
25
62.5
12.5
Total 40 100
From the table 4.4, shows that Age 35-44 consist the largest
population sampled (62.5%) while age 25-34 years falls into 25% and
45 years falls into 12.5% of the total respondents sampled.
34
Table 4.5: Qualif ications of Respondents
Qualification Number of
respondents
Percentage
(%)SSCE/GCE O level
OND/NCE/ATT
HND/BSC
ACCA, ACA, ACIB
MBA, MA, MSC, MPA
-
5
20
10
5
-
12.5
50
25
12.5Total 40 100
Table 4.5 shows that HND/BSC is 20 (50%) of the total respondents,
while ACCA, ACA, ACIB is 10 (25%), OND/NCE, AAT is 5(12.5%) and
MBA, MA, MSC, MPA is 5 (12.5%) of the population sampled.
Table 4.6: Length of Service
Length of service Number of
respondents
Percentage (%)
1-5
6-10
11-15
16 years & above
2
8
25
5
5
20
62.5
12.5Total 40 100
The table 4.6 above shows clearly that 11-15 years of length of
service constitute the 25 (62.5%) of the population, 6-10 years is
8(20%), 16 years and above and above is 5 (12.5%) and 1-5 years is
2(5%) of the total population sampled.
35
Table 4.7: Do You Understand What Merger and
Acquisition Means?
Options Number of respondents Percentage (%)Yes
No
20
20
50
50Total 40 100
From the analysis above in table shows that 50% of the respondents
understand what is meant by merger and acquisition, while 50% of
the respondents do not.
Table 4.8: Is Merger and Acquisition a Significant
Economic Tool for Business?
Options Number of respondents Percentage (%)Yes
No
20
20
50
50Total 40 100
From the table 4.8 shows clearly that 50% of the respondents agreed
that merger and acquisition is significant economic tool for business
revitalization some do not agree.
Table 4.9: Is Merger and Acquisition the Best Ways to
Revamping a Fail ing Business and Enhancing Business
Growth?
Options Number of respondents Percentage (%)Yes 35 87.5
36
No 5 12.5Total 40 100
The table in 4.9 indicates that 87.5% of respondents are of the
opinion that merger and acquisition is the best way of revamping a
failing business and enhancing business growth, while 12.5% of the
respondents disagree.
Table 4.10: Can Business Growth and Efficiency be
Divorced from Merger and Acquisition?
Options Number of respondents Percentage (%)Yes
No
20
20
50
50Total 40 100
In the above table shows that 50% of the respondents disagrees as
50% agree to the fact that business growth and efficiency divorced
from merger and acquisition.
Table 4.11: Merger and Acquisition Does Not Enhance
Growth and Efficiency of Business Operation
Options Number of respondents Percentage (%)Yes
No
20
20
50
50Total 40 100
From table 4.11 states clearly that 50% of the respondents agrees
and 50% of the respondents disagrees to the option that merger and
acquisition does not enhance growth and efficiency of the business
operation.
37
Table 4.12: Does Merger and Acquisition Enhance Growth
and Ensure Efficient Business Operation?
Options Number of respondents Percentage (%)Yes
No
30
10
75
25Total 40 100
Table 4.12 reveals that 75% of the respondents are of positive
support that merger and acquisition enhances growth and ensures
efficient business operations, while 25% of the respondents disagree.
4.4 ANALYSIS AND TEST OF HYPOTHESIS
The general purpose of hypothesis or significance testing is to
examine the degree of validity and reliability of hypothesis and the
degree of freedom. The chi square test is given as:
The chi square test is given as:
X2 = (0-E) 2
E
Where = Summation
O= observed frequency
E = Expected frequency
The statistical test at 5% level of significance that:
Answers given by the respondents are denoted by the term observed
frequencies (0) while the theoretical frequency is denoted by term
expected frequency (E).
Expected frequency = (Row total x Column Total)
Grand total
38
HYPOTHESIS TESTING
Ho: Merger and Acquisition does not enhance growth and efficiency
of Business operation
Hi: Merger and Acquisition enhance growth and efficiency of business
operation
DECISION RULE
If the chi square calculated values exceeds the Null Hypothesis (Ho)
and then accept the Alternative Hypothesis (Hi).
HYPOTHESIS I
Options
Questions
Total 7 8 9 10
Yes
No
30
10
20
20
35
5
20
20
105
55Total 40 40 40 40 160
The derivation of expected frequency is as follows:-
Expected frequency = (Row total x Column Total)
Grand Total
F (1.1) = (105 x 40) 160 = 26.3
F (1.2) = (105 x 40) 160 = 26.3
F (1.3) = (105 x 40) 160= 26.3
F (1.4) = (105 x 40) 160 = 26.339
F (2.1) = (55 x 40) 160 = 13.8
F (2.2) = (55 x 40) 160 = 13.8
F (2.3) = (55 x 40) 160 = 13.8
F (2.4) = (55 x 40) 160 = 13.8
SUMMATION OF THE CHI SQUARE CALCULATED VALUE
Cells Observed
frequenc
y
Expected
frequency
0-E (O-E)2 (O-
E)2/E
F (1,1)
F (1,2)
F (1,3)
F (1,4)
F (2,1)
F (2,2)
F (2,3)
F (2,4)
30
20
35
20
10
20
5
20
26.3
26.3
26.3
26.3
13.8
13.8
13.8
13.8
3.7
-6.3
8.7
-6.3
-3.8
6.2
-8.8
6.2
13.69
39.69
75.69
39.69
14.44
38.44
77.44
38.44
0.52
1.51
2.88
1.51
1.05
2.79
5.61
2.79 X2 CALCULATED 18.66
Chi square calculated value = 13.939
Chi square (x2) table value at 5%
Level of significance
Degree of freedom (DF) = (R-1) (C-1), 0.05
(2-1) (4-1)
(1) (3), 0.05
7.81
40
COMMENTS
Since the chi square calculated value of 13.939, we reject the null
hypothesis and then accept the alternative hypothesis, which states
that merger and acquisition, is effective and effective strategy for
failing business organization.
4.5 SUMMARY OF HYPOTHESIS FINDINGS
HYPOTHESIS 1
Ho: merger and acquisition does not enhance growth and efficiency
of business organization
Hi: Merger and Acquisition enhance growth and efficiency of business
operation.
OBSERVATION AND DECISION
It was observed that the chi square calculated value 18.66 exceeds
the chi square tabulated value 18.66 exceeds the chi square tabulated
value of 7.81, we reject the null hypothesis and accept the alternative
hypothesis which states that: Merger and Acquisition is an effective
and efficient survival strategy for failing business operation.
REFERENCES
Adam S.O (1991): Statistical Beginners, Evans Brothers Ltd., Ibadan.
Aborishade F. (1977): Research Method, A Student Handbook
Multiform Ltd, Lagos.
Hamburg M. (1977): Basic Statistic Modern Approach, 2nd Edition
Harcourt Brace International, New York.
41
Lury D.A (1984): Data Collection in the Development Countries,
Great Britain, Oxford University Press Ltd, London.
Nnamdi A. (1996): Research Methodology in the Behavioral
Sciences, Longman Nig Plc. Lagos.
42
CHAPTER FIVE
5.0 SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY
Clearly, mergers and acquisition as form of business combination are
common occurrence in time of born as well as depression. The
combinations have involved companies of various sizes and lines of
business. Very often, huge sums of money have also been involved.
In Nigeria, which perhaps has the highest frequency of business
combinations, diverse literature has been written to cover at least the
importance fact of merger and acquisition.
A merger has been defined by the companies Allied Matters Act of
(1990) as any amalgamation of two undertakings or interests of two
or more companies or the undertakings of one or more companies
and one or more corporate bodies. Merger therefore simply describes
the combination of two or more separate companies to form a single
company.
Acquisition and or take over on the other hand, describes the process
of acquiring by one company of sufficient shares in other company to
give the acquiring company control over that of the other through the
purchase of the assets (rather than shares) of the other company.
43
From the test of hypothesis conducted in chapter four using total Elf
as a case study, the followings is the summary of its findings.
Hypothesis X2 calculated X2 tabulated Degree of
freedom
Level of
significant1
1,1
18.66
18.66
7.81
7.81
3
3
0.05
0.05
HYPOTHESIS 1
Ho: Merger and acquisition does not enhance growth and efficiency of
business operation.
DECISION
Since the calculated chi square of 18.66 exceeds the table value of
7.81, we reject the Null Hypothesis (Ho) and then accept the
alternative Hypothesis (Hi) which state that:
Merger and Acquisition enhances growth and efficiency of business
Operations
HYPOTHESIS II
Ho: Merger and Acquisition is not effective and efficient survival
strategy for failing business organizations.
DECISION
Since the calculated chi square of 13.939 exceeds the table value of
7.81, we reject the Null Hypothesis (Ho) and then accept the
alternative Hypothesis (Hi) which state that:
Merger and Acquisition is an effective and efficient
survival strategy for fail ing business operations44
besides, it is important to mention that exists various forms of
business revitalization / re-engineering strategies or options of which
merger and acquisition is one and that there is one off
strategy/option proven to be the best of all, rather the choice of
business reviving option would depend on some non qualitative
factors like nature of industry, time frame, economic situation/
indices, government policies and technological advancement et
cetera.
5.2 CONCLUSION DRAWN FROM THE FINDINGS
For mergers and acquisition to be fully accepted or undertaken by
Nigeria companies, awareness must be created through organization
of workshops, seminars, symposium by reputable and corporate body
to enlighten Nigerians entrepreneurs/businessmen.
It would not be over emphasized to deduce that much stands to be
benefited by the economy through mergers and acquisitions. This is
in terms of synergistic effects, pooling of relative resources, ability to
secure more credit facilities from financial institutions, which further
increase production capacity and subsequently, qualitative and
quantitative goods and services, cut in administration and overhead
cost and the diversification advantages goes beyond long way to
improve the economy.
The scheme favours businesses that are capital intensive in nature
such as manufacturing concerns, transport and communications,
agricultural sector, oil and mining sector etc.
45
The idea of the science being foreign is gradually disappearing as
many Nigeria companies have taken to the administration of the
scheme. This is borne out of the realization of the benefits to be
gained and the fact that most companies who had undergone it have
been successful. For example, Lever Brothers Nig Plc merged with
Lipton Ltd. And Cheese borough Products Ltd, Nigeria Breweries Plc
acquiring Schweppes from Nigeria Bottling Company Plc, Smitkline
Beecham plc acquiring sterling products plc and total Nigeria Plc,
merged with Elf Nigeria Plc. (the case study).
5.3 RECOMMENDATIONS BASED ON CONCLUSION DRAWN
In view of the findings of the research study, the following is hereby
recommended that:
Merger and Acquisition should be encouraged particularly at a time
like this. Due, to economic downturn many companies are finding it
difficult to survive on their own.
Tax holidays and other relative incentives should stand one of the
benefits to be enjoyed by companies already or intending to
undertake the scheme to encourage more companies on the verge of
collapsing. Awareness created to enlighten the Nigeria Business
Community should not be restricted to only top executives but also
disseminated to the employees at various levels.
Statutory regulations should be introduced to limit the tendency of
mergers and acquisition becoming in the short run monopolistic
practices.
46
The Nigerian Accounting Standard Board (NASB) scope of legislations
is broadened to incorporate the accounting standards for mergers and
acquisitions formation.
For other sectors like the Banking industries which has been lately
besieged with distress, suggestions have gone to the four big banks
to acquire the distressed banks and some have been advised to
merge together to save the industry from loosing the confidence
bestowed on them by the public.
Suggestions have gone to big banks to acquire the distressed bank
and most banks have been merged together.
5.4 SUGGESTION FOR FURTHER STUDIES/INVESTIGATIONS
In an attempt to validate or dispel the upsurge in adverse opinion on
mergers and acquisition as a survival strategy for failing businesses,
certain areas were revealed which were beyond the scope of the
study. Thus, I suggest further studies or investigations in the
following areas.
Mergers and acquisition: Accounting implication a case study of
Smithkline Beecham Plc.
Mergers and Acquisition: A survival strategy for failing business.
Mergers and Acquisition: A tool for revamping the Nigeria economy.
47
BIBLIOGRAPHY
Aborishade F. (1997):Research Method, A Student Handbook, Multi
Form, Ltd, Lagos.
ACCA (1987): Advanced Accounting Practice, Financial Accounting
(London: BPP)
Adam S.O. (1999): Statistics for Beginners, Evans Brothers Ltd,
Ibadan.
Alvemeche K.O (1996): Accounting for Mergers and Acquisitions of
Business in Nigeria.
Ammer C. (1977): Dictionary of Business and Economic Published by
New York Free Press.
Camp (1990): companies and Allied Matters Decrees. Published by
Federal republic of Nigeria.
GEE, PAUL (1988): Book Keeping and Accounting. 20th Edition (Kent:
ELBS/Butter Worth).
Hamburg (1977): Basis Statistics Modern Approach, 2nd edition,
Harcourt Brace International, New York.
IAS (2002): International accounting standard, paragraph 3, No22
48
ICAN study text (1988): PE II Financial Management (Lagos
Associates)
Innocent Okwuosa (2000): Group Accounts. Safe Publication Ltd.
Lagos.
Jennings A.R (1990): Financial accounting Manual, 2nd and 3rd
Edition education, Low Price Books Scheme (ELBS) Publisher.
Kam, Vernom (1990): Accounting Theory, 2nd Edition (New York:
John Wiley and sons Inc.)
Lury D. A (1984): Data Collection in the Development Countries,
Great Britain, Oxford University Press Ltd. London.
Mathur I. (1976): Financial Management. Macmillan Publication
Company Incorporation, New York.
Nnamdi A. (1996): Research Methodology in the Behavioral
Sciences, Longman Nig. Plc, Lagos.
Okwuosa I. (2000): Groups Account, published by Arnold Consulting
Ltd. Martins Street, Lagos.
Pandey I.M (1990): Financial Management (New Delhi: Vikas
Publishing)
TOTAL FINA ELF, TOTAL/ELF (2001) scheme of merger
49
Lagos State Polytechnic, Lagos
School of Part time studies
Department of Accountancy
May, 2009
Dear Respondent
LETTER OF INTRODUCTION
I am a Higher National diploma final year student of the above
mention institution carrying out a research project on the impact of
Merger and acquisition of business in Nigeria.
I am presenting this project in partial fulfillment for the award of
Higher National Diploma in Accounting.
All information with the questionnaire would be treated with utmost
confidentiality.
This questionnaire is purely designed for academic purposes and
would be very grateful, if you can help in completing it.
Thank for your co-operation
Yours faithfully,
Aliu Muyideen
50
Please tick () for relevant answer where applicable.
1. SEX male { } Female { }
2. DEPARTMENT Finance { }
Technical { }
Personnel { }
Accounts { }
Audit { }
3. AGE 15 25 Years { }
26 35 Years { }
36 45 years { }
40 Year and above { }
4. Position held in the company
Senior management staff { }
Supervisory { }
Junior management { }
Clerical staff { }
Other specify { }
5. Academic / Professional Qualification
WASC / GCE O level or Equivalent { }
OND, NCE & GCE A Level { }
HND, B. sc , BA or Equivalent { }
M. sc, MBA, MA or Equivalent { }
Other specify please { }
6. How long have you been in the service?
1 5 years { }
6 10 years { }
11 15 years { }
51
16 - 20 years { }
21 25 years { }
26 years and above { }
7. Length of service
1 - 5 Years { }
6 10 years { }
11 15 years { }
16 20 years { }
21 years and above { }
8. Marital status:
Married { } Single { } Divorce { }
9. Do you understanding what Merger and Acquisition means?
Yes { }
No { }
10. Is Merger and Acquisition a significant economic tool business
revitalization?
Yes { }
No { }
11. Is Merger and Acquisition the best way of revamping a failing
business and enhancing business growth?
Yes { }
No { }
12. Can business growth and efficiency be divorced from Merger and
Acquisition?
Yes { }
No { }
52
13. Merger and Acquisition doesnt enhance growth and ensure efficiency
business operation?
Yes { }
No { }
14. Does Merger and Acquisition enhance growth and ensure efficiency
business operation?
Yes { }
No { }
15. Is Merger and Acquisition a survival strategy?
Yes { }
No { }
16. Is Merger and Acquisition an Effective strategy for revamping failing
business?
YES { }
No { }
53