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ABSTRACT
Merger
and acquisition has been widely acclaimed by scholars and professionals in
business as the most desirable and effective strategy to revive the difficult
situations facing Nigeria
economic climate. The situation is so terrible that organizations had to turn
around and adopt strategy to survive through this turbulent water. This research work has the objective
undertaking to examines, analyze and evaluate the effectiveness of merger and
acquisitions as a strategy for organizational survival in Nigeria and
investigates whether it can result to economic of scale and increase
profitability of the combined firms. To this end, questionnaire were
administrated to Oando Nigeria Plc and some few other organizations that
merged. The data and information collected were analyzed using simple tables,
frequencies and percentages. The findings of this research reveals that merger
and acquisitions brings about improve in the productivity of the emerged
organizations. The researcher is of the opinion that, based on the findings,
the recommendations made if properly followed, it will improve the activities
of merger and acquisition for the benefit of the government, proposing
organizations and the interested public at large.
TABLE OF CONTENTS
Cover
page – – – – – – – – – i
Title
page – – – – – – – – – – ii
Declaration – – – – – – – – – – iii
Approval
page – – – – – – – – – iv
Dedication – – – – – – – – – – v
Acknowledgement – – – – – – – – vi
Abstract – – – – – – – – – – viii
Table
of content – – – – – – – – – ix
CHAPTER ONE – Introduction
1.0 Background of the study – – – – – – 1
1.1 Historical Background of Oando Nigeria Plc – – – 3
1.2 Statement of the general problem – – – – – 5
1.3 Objective of the study – – – – – – – 6
1.4 Significance of the study – – – – – – 8
1.5 Research question – – – – – – – 9
1.6 Statement of hypothesis – – – – – – 10
1.7 Scope and limitation of the study – – – – – 10
1.8 Definition of terms – – – – – – – 12
CHAPTER TWO – Review of Related Literature
2.0 Introduction – – – – – – – – 14
2.1 Merger and Acquisition definitions – – – – – 14
2.2 Types of Merger – – – – – – – – 16
2.3 Strategies for business survival – – – – – 18
2.4 Motive behind merger and acquisition – – – – 19
2.5 Reason for merger and acquisition preference
over
investment in new business generated
from scratch – – 23
2.6 Procedure for effective merger – – – – – 26
2.7 Method of financing merger – – – – – – 28
2.8 Merger and acquisition investment banking – – – 31
2.9 Merger and acquisition market place
difficulties – – 32
2.10 The effect of merger and acquisition – – – – 35
2.11 Legal issues in M & A – – – – – – – 36
2.12 Regulation of M & A in Nigeria – – – – – 37
2.13 Summary of the review – – – – – – – 40
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction- – – – – – – – – 42
3.1 Area of study – – – – – – – – 42
3.2 Research design – – – – – – – – 43
3.3 Research population – – – – – – – 43
3.4 Sample and sampling technique – – – – – 44
3.5 Data collection instruments – – – – – – 44
3.6 Data collection method – – – – – – – 46
3.7 Validity and reliability of the instrument – – – – 46
3.8 Administration of research instruments – – – – 47
3.9 Techniques of data analysis (mode) – – – – 47
CHAPTER FOUR – Presentation and Analysis of
Data
4.0 Introduction – – – – – – – – 49
4.1 Respondent characteristic and classification – – – 49
4.2 Presentation and Analysis of data – – – – – 50
4.3 Testing of hypothesis – – – – – – – 58
4.4 Summary of findings – – – – – – – 60
CHAPTER FIVE – Summary, Conclusion and
Recommendation
5.0 Introduction – – – – – – – – 62
5.1 Summary – – – – – – – – 62
5.2 Conclusion – – – – – – – – – 65
5.3 Recommendations – – – – – – – 65
Bibliography – – – – – – – – – 68
Appendix
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND
OF THE STUDY
The
increase in oil boom in the 70’s was an era of huge and expensive prospect of
doubtful utility and viability. However, the heavy dependence on oil and
imported input rendered the Nigerian economy to be sensitive to external shocks
with the collapse of the world oil market in the mids 1981, an economic crisis
emerged in Nigeria, various control measures were put in place in order to
correct the disturbing situation between 1982 – 1985 but these measures failed
to deal effectively with the fundamental economic and financial problems
confronting the economy which was deteriorating.
The
nation began to face a situation of persistence and deteriorating balance of
payment problem, the external debt continually rise, the emotion of
international credit worthiness and the acute shortage of raw materials and
consumer goods, as agriculture suffered and severely, neglected, the country
(Nigeria) was at the point of collapsing.
Considering
the above circumstances, there is need for national economic reform which the
federal government eventually came up with Structural Adjustment Programme
(SAP) in 1988 as a strategy to end the deformation of the nation economy and
achieve a turn around in the fortunes.
The
current global economic depression facing the world has been described by the
world economic and financial experts as the longest and deepest depression in
the post war period. Major industrial developed countries share in this performance
characterized by declining growth rate, high inflationary pressure, increase in
number of unemployment and this trend had serious adverse effect on the
economic of developing countries of which Nigeria is included.
The
present development is quite affecting a substantial number of Nigeria
contemporary business most of them are on the path of decline, leading to
folding up of some companies and many others laying off their staff and
equipment as a result of operational hardship with lack of ability to expand
and decline in sales volume as well as profit.
With
the present difficult situation in the Nigeria businss environment. There
is need for businesses to be re-structured for survival in response to changes
that is occurring in the economic environment either a company decide whether
to acquire, merge or sell part or whole of its existing business thus, given
birth to a stronger, bigger and more profitable outfit that is capable of
surviving amidst strong competition.
1.1 HISTORICAL
BACKGROUND OF OANDO NIGERIA PLC
Oando
Plc commence its business operation as a petroleum marketing company in Nigeria
in 1956 under the name “ESSO West Africa Incorporated” a subsidiary of Export
Corporation of the USA. In 1969, the company was incorporated under Nigeria laws as
“ESSO standard Nigeria Limited. In 1976, the Nigeria Government brought ESSO
interest and thus, became the 100% owner of the company. The company was then
rename “Unipetrol Nigeria Limited”.
On 1st March, 1991
the company became a public limited company and was known as Unipetrol Nigeria
Plc in the same year, 60% of the company’s shares was sold to the Nigeria public
under the first phase the then privatization exercise and the company was
quoted on the Nigeria
stock exchange in February 1992.
In
2000, under the 2nd phase of the Federal Government of Nigeria’s
privatization programme, ocean and soil services limited became a core investor
by acquiring 305 of the Federal Government’s 40% equity stock in the company,
the remaining 10% was sold to the Nigeria public. The investment in
the then Unipetrol Nigeria Plc by Ocean Oil Services Limited was with support
of its International Technical Partners Compania Espanola De Petroleos (CESPSA)
who are currently 2nd largest oil group in Spain and ranks among the
top 10 oil group in Europe. CEPSA is a fully Integrated Petroleum Company
involved in exploration and production, petrochemicals natural gas, trading,
refining, distributing and marketing.
In
August 2002, the company acquired Agip Petrol’s 60% stake of Agip Nigeria Plc,
the sale of the 60% interest of Agip Petrol International was the result of an
international bid conducted by Agip petrol international B.V with the
assistance of an international adviser during which Agip Petroleum
International selected to them Unipetrol Nigeria Plc following the acquisition
of Agip Nigeria Plc the company was again i.e. branded to Oando Plc in 2003 and
emerged as Nigeria
2nd largest company in the downstream sector of the oil industry
with 15.64% market share.
1.2 STATEMENT
OF THE GENERAL PROBLEM
Due to
the present economic situation of the country (Nigeria), report indicated that
many Nigeria businesses and corporate organizations have closed up while many
more may soon close up, even those that have survived, it has been a mergical
survival and they are operating far below installed and optimum productive
capacities leaving none in doubt that the situation is bad enough, the
following problems are notice.
·
There is need to note the fact that many of
this organization that are depressed situation can either still be acquired or
merged with more prosperous and strong enterprise. In other word, an
alternative to this ugly economic woe in
the country should have been for companies to come together and continue
through merger or acquisition.
·
There is overextension which tend to make the
organization fuzzy and unmanageable. There is manager’s hubris, overconfidence
about synergies form merger and acquisition which results in overpayment for
the target company.
·
There is negative reactions from company’s
employees, bankers, suppliers, customers and other which make the process by
which a company is bought or sold prove difficult, slow and expensive. Thus,
they are not sold as often as they might or should be.
·
Multiple listing service concept has not been
applicable to merger and acquisition due to the need for confidentiality.
·
There is lack of proper method, apparatus and
techniques for efficiently executing merger and acquisition transactions
without compromising the confidentiality of thee parties involved without
unauthorized release of information.
·
Lack of good recording keeping of incomes from
business undertakings, mostly attributed to illiteracy and in other cases, a
deliberate attempt to evade tax is also a problem.
1.3 OBJECTIVE
OF THE STUDY
No
business is embarked upon without a set of objectives t
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