LEGAL FRAMEWORK AND CONSEQUENCES FOR MERGERS AND ACQUISITIONS IN NIGERIAN BANKING INDUSTRY
1.1. Background of the Study
The study examines the Legal Framework for Mergers and Acquisitions in Nigerian Banking Industry and how Mergers and Acquisition affect the performance of the Banking Industry in Nigeria. It also seeks to ascertain the improvements which ISA 2007 has made on the old law contained in part XI, ISA 1999 (now repealed).
Mergers and Acquisitions are the latest solution to save the lives of banks, companies, and other industries that are collapsing in recent years. The year 2005 witnessed the reduction of 89 banks to 25 as a result of the re-capitalization policy of the Central Bank of Nigeria (CBN) from N2 billion to N25 billion in Nigeria. Also, many companies, banks, and business ventures have collapsed leaving those who invested in such ventures suffering. In the 1980s when the Co-operative and Commerce Bank (Nigeria) Ltd booming with golden advertisement on televisions and radios suddenly collapsed, many customers lost their deposits in that bank. Suddenly, Savannah Bank followed and other banks such as the All States Trust Bank, City Express Bank, ACB, International Bank, and Hallmark Bank. In the light of this, the failed Bank Tribunal was set up and some workers of such banks were tried and jailed, but this did not solve the problem of business collapse and banks liquidation.
The Central Bank of Nigeria (CBN) sort for solutions to alleviate the sufferings of the customers, shareholders, debenture holders and creditors, etc. thus the idea to re-organise the banks. In achieving this, the banks in the country resorted to mergers, acquisitions, take-overs, compromise, and amalgamation in their restructuring.The Federal Government of Nigeria was advised to undertake a consolidation programme that will result in mergers and acquisitions among banks in the country, strengthen them and put an end to the frequent collapse of banks in Nigeria. It is better to have few banks and other companies with reliable safety standards than numerous banks whose safety standards cannot be guaranteed. With recapitalization and consolidation in banks and insurance industries, it gradually extended to other sectors of the economy like the airline industry operators. The relevant laws were transferred to the Investment and Securities Act (ISA) 2007 No. 29 to have them in one body of legislation. Mergers and acquisitions, will involve preliminary steps, verification of corporate structure, verification of titles to assets, Banking/Financial taxation matters, Intellectual property, rights permits, and authorization, miscellaneous and deliverables. Also the ways of petitioning to the court for mergers and acquisitions by both 1st and 2nd petitioners became obvious and will be considered in this study.