THE ROLE OF MERGER AND ACQUISITION ON ORGANIZATIONAL SURVIVAL IN NIGERIA

(A CASE STUDY OF OANDO NIG. PLC AND AGIP NIG. PLC, KADUNA ZONAL OFFICES)

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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

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 1^st 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 2^nd 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 2^nd 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 2^nd 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

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