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An Evaluation Of Merger And Acquisition As An Alternative Strategy For Business Survival In Nigeria


This research work was conducted to critically evaluate merger and acquisition as an alternative strategy for business survival in Nigeria, a case study of Mainstreet Bank Limited and First City Monument Bank, Gusau, Zamfara State. It was observed that a lot of banks have closed-up while others are struggling to stay afloat, even some that have survived are still operating below optimum capacity, this is leaving one in no doubt that the situation is critical and have to be ironed out.

Thus, the researcher seeks to find out if merger and acquisition could be used as one of the viable options for rescuing some of these distressed banks so as to survive and thrive in the dynamic business environment. This study takes into cognizance issues such as overview of merger and acquisition of companies in Nigeria, the reasons and economic gains of corporate restructuring (merger and acquisition), amongst others. 

The sample size of this research work constituted the total number of the population, which is forty (40) and there was no sampling technique employed because of the limited number of staff in the two banks. The survey research design was adopted for the study, using primary and secondary method of data collection to gather relevant information. The data collected from the administered questionnaires were presented and analyzed using the simple percentage and chi-square statistical techniques. 

It was discovered that merger and acquisition can be used as an alternative strategy for business survival in Nigeria. Based on the strategic posture of corporate restructuring on business and its impact on the shape of the country’s economy, it was recommended that merger and acquisition should be used as a survival and expansion strategy, and more companies or banks should be encouraged by the relevant authorities to participate in merger and acquisition bids. 

Title page


Approval Page



Table of Contents




1.1  Background of the Study

1.2  Statement of  the Problem

1.3  Objectives of the Study


1.4  Research Questions

1.5  Research Hypothesis

1.6  Significance of the Study

1.7  Scope of the Study

1.8  Limitations of the Study

1.9  Historical Background of the Case Study

1.10 Definition of Terms.



2.1  An Overview of Merger and Acquisition of Companies

2.2  Definition of Merger and Acquisition

2.3  Types of Merger

2.4  Reasons for Merger and Acquisition

2.5  Economic Gains of Merger and Acquisition

2.6  Process of Merger and Acquisition

2.7  Strategies of Merger and Acquisition

2.8  Defensive Tactics or Mechanics of Merger

2.9  Common Reasons for Merger and Acquisition Failure

2.10   Government Regulation for Merger and Acquisition in Nigeria

2.11   Summary



3.1    Research Design

3.2    Population of the Study

3.3    Sample Size

3.4    Sampling Techniques

3.5    Instruments Used for Data Collection

3.6    Method of Administration of Questionnaires

3.7    Methods of Data Analysis



4.1    Introduction

4.2    Data Presentation and Analysis

4.3    Test of Hypothesis

4.4    Summary of Findings.



5.1   Summary

5.2   Conclusions

5.3   Recommendations






The motive behind any corporate entity in business is to accelerate its operations in a bid to maximize shareholders’ wealth and growth potentials. As a result of the competitive nature of the economy, free flow of capital across international boundaries, globalization, economic integration etc., the efficiency of operational functions and the speed of growth have become very essential to ensuring business survival and continued sustainability, especially among organizations that are struggling to stay afloat.

However, to survive and thrive in a dynamic business environment, an entrepreneur may grow his business either by internal or external expansion. In the case of internal expansion, a firm grows gradually overtime in the normal course of the business through acquisition of new assets, replacement of the technologically obsolete equipments and establishment of new line of product. But in the case of external expansion, a firm acquires a running business and grows overnight through “corporate combinations”. These combinations are in form of merger and acquisition, takeovers, leverage buyouts, sales of business units or assets, capital reorganization etc. and have now become important features of corporate restructuring.

In today’s business world, corporate restructuring through merger and acquisition have become controversial issues. Some proponents argued that merger and acquisition increase efficiency and could be used as an alternative strategy in the case of corporate distress, whereas others argued that they decrease consumer’s welfare by monopoly power. However, the key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies.

Two companies together, are more valuable than two separate companies; at least, that is the reasoning behind merger and acquisition. The rationale is particularly alluring to companies, when times are tough, strong companies will act to buy other companies to create a more competitive and cost efficient company. The companies will come together, hoping to gain a greater market share or to achieve greater efficiency. As a result of these potential benefits, target companies will often agree to be purchased, when they know they cannot survive alone. Thus, one plus one makes three “1+1 =3” is the special alchemy of merger and acquisition.

Also, an economy under recession like Nigeria provides compelling reasons for corporate bodies to seek merger and acquisition as a survival strategy with the hope that the combined enterprise will stand a better chance of weathering the storm. The harsh climate of the structural adjustment programme has also made merger and acquisition inevitable.

In the wake of economic reforms, Nigerian industries have started restructuring their operations around their core business activities through merger and acquisition. According to Akinsulire (2011), the first successful merger in Nigeria was between A.G. Leventis &Co. Ltd and Leventis stores Ltd. However, the most celebrated one was between Lever Brothers Nigeria Limited (a quoted company) and Lipton Nigeria Limited (a private company) in 1984.

Similarly, the Central Bank of Nigeria (CBN) found nine commercial banks to be under-capitalized in 2009 due to the global financial crisis. These banks were rescued with bridge funding until permanent investors could be found to provide new capital to meet statutory limits.

During this crisis, some banks merged while others were acquired in order to deleverage failing balance sheet that otherwise may have put them out of business. Some of the successful merger and acquisition were between Eco Bank Nigeria Plc and Oceanic Bank Plc in 2011, Keystone Bank Limited formerly Bank PHB in 2011, Access Bank Plc and Intercontinental Bank Plc in 2011 and Mainstreet Bank Limited formerly Afri Bank Plc in 2011 among others. The successful recapitalization of the rescued banks has significantly engendered economic growth and development as a result of the soundness, healthiness and stability achieved by the entire system.

Finally, merger and acquisition are strong strategic decisions that are carefully planned to achieve a synergistic effect and have always kept the interests of economists alive.


The need to carry out this research arose from the challenges faced by some business organizations in Nigeria, which have really made it difficult for them to achieve their set goals and objectives.

In the pasts, reports have shown that a lot of firms have closed-up while others are struggling to stay afloat. Even some that have survived are still operating below optimum capacity, this is leaving one in no doubt that the situation is critical and have to be ironed out.


The study is designed to:

  1. To know the meaning of merger and acquisition.
  2. To identify the motives behind corporate merger and acquisition.
  3. To critically evaluate merger and acquisition as an alternative strategy for business survival in Nigeria.
  4. To know the processes involved in merger and acquisition.
  5. To identify factors that may cause merger and acquisition failures and to proffer solutions accordingly.


The following questions were examined:

  1. What is merger and acquisition?
  2. What are the motives behind corporate merger and acquisition?
  3. Could merger and acquisition serve as an alternative strategy for business survival in Nigeria?
  4. What are the processes involved in merger and acquisition?
  5. What are the factors responsible for merger and acquisition failures?


For the purpose of providing a directive for this research work, the following hypotheses were formulated:

Ho:   Merger and Acquisition is not an alternative strategy for business survival in Nigeria.

Hi:    Merger and Acquisition is an alternative strategy for business survival in Nigeria.


  1. Nigerian experience with merger and acquisition is both recent and extremely limited. Therefore, this study is intended to contribute to the advancement of knowledge by providing students and other researchers who may be interested in undertaking researches in related area (s) with analytical skills and abilities.
  1. A research work of this nature is of immense importance to corporate bodies, who have either engaged in merger and/or acquisition and those who are yet to embark on such decisions.
  2. Also, the government and its agencies, most especially those that are established to approve and regulate merger and acquisition proposals, would also find this study very beneficial in the course of their operations.
  1. It will further help to assess the role of merger and acquisition as an alternative strategy for business survival in Nigeria.


The study centered on the evaluation of merger and acquisition as an alternative strategy for business survival in Nigeria with reference to Mainstreet Bank Limited and First City Monument Bank Plc, Gusau, Zamfara State.


In every research work, there are constraints that tend to limit the activities of the researcher, of which this project is not left out.

One of those constraints tends to be the time scheduled for the project. Being an academic research, the researcher could not obtain more detailed information because the time allowed for this study coincides with lecture periods and likewise the banks’ busy hours.

Notwithstanding, lack of sufficient information from the case study also posed a great threat to this work. Some key information could not be at the researcher’s disposal as a result of the confidentiality of such information to the organizations under study.



Mainstreet Bank Limited (MBL), also referred to as Mainstreet bank is one of the commercial banks licensed by the central Bank of Nigeria (CBN), the country’s banking regulator.

In 2009, the Central Bank of Nigeria found nine (9) Nigerian commercial banks to be under-capitalized amongst which Afribank Nigeria Plc was one of them. However, the central bank rescued the banks with bridge funding until permanent investors could be found to provide new capital to meet statutory limits. Afribank Nigeria Plc later failed in 2011 and its banking license was revoked by the Central Bank of Nigeria (CBN).

Mainstreet Bank Limited was formed in August 2011 by taking over the assets and some of the liabilities of the now defunct Afribank Nigeria Plc, whose commercial banking license was revoked. Following the merger, the Federal High Court of Nigeria in Lagos ordered that the affairs of the defunct Afribank Nigeria Plc should be wound up, since its license had been revoked. Mainstreet Bank Limited was issued a commercial banking license on 5th August, 2011.

As of January 2012, the assets of Mainstreet Bank Limited were 100% owned by Asset Management Company of Nigeria (AMCON), an arm of Federal Government of Nigeria. The Chairman of the Board of Directors of Mainstreet Bank Limited is Falalu Bello. The Managing Director and Chief Executive Officer of the bank is Faith Tuedor Mathews. As of June 2012, Mainstreet Bank Limited maintains a network of over 220 branches in all states of Nigeria.

Mainstreet Bank Limited, Gusau Branch is one of its rural branches and it is situated at No. 103 Sanni Abacha way, Gusau – Zamfara state. Mainstreet Bank Limited, Gusau branch was established in 2011, and since then, has been providing services such as opening of accounts, acceptance of deposits, granting of loans and overdraft facilities, among others. The branch has a number of twenty one (21) staff, comprising of the branch manager and other personnel working together towards achieving the corporate goals and objectives.


First City Monument Bank Plc (FCMB) is the flagship company of the First City Group, one of the Nigeria’s leading comprehensive financial service providers. From its early origins in investment banking as City Securities Limited in 1977, FCMB (established in 1982) has emerged as one of the leading financial services institutions in Nigeria, one of the top eight lenders in the country with subsidiaries that are market leaders in their respective segments.

FCMB was incorporated as a private limited liability company on 20th April, 1982 and granted a banking license on 11th August, 1983. On July 15, 2004, the bank changes its status from a private limited liability company to a public limited liability and was listed on the Nigerian Stock Exchange by introduction on 21st December, 2004.

As a leading financial services provider, FCMB’s success has been recognized by many industry awards over the years both nationally and internationally. In 2008, it won the Euro Money Award for the Best Equity House (Nigeria) and was named the Best Investment Bank in Nigeria at the Euro Money 2007 Awards for Excellence.

The bank had been adjudged Nigeria’s most consistent issuing house/financial advisor 1993-1998 by Reuters and SBA Research Limited in June 2000 and was also the winner of the 1999 platinum Division in the first Reuters sponsored Nigerian Issuing House Awards. In 2000, FCMB also received the inaugural Mergers and Acquisitions Award in recognition of its expertise in this area. It has subsequently received the 2001 and 2002 Award in the same category. FCMB Plc is the first and only bank in Nigeria to have held these diverse awards at the same time, and remains the only institution to have won the Mergers and Acquisitions Award for three (3) consecutive years.

In 2009, the Central Bank of Nigeria (CBN) found nine (9) Nigerian Commercial Banks to be under- capitalized, First Inland Bank Plc was one of them. The Central Bank rescued the nine banks with bridge funding until permanent investors could be found to provide new capital to meet statutory units. In November 2010, both First Inland Bank Plc (Fin bank) and First City Monument Bank Plc (FCMB) announced that FCMB has expressed interest on acquiring shareholdings and become the strategic investor in Fin Bank Plc. In February 2012, following regulatory approval, FCMB Plc acquired 100% shareholdings and began integration of Fin Bank Plc in its existing operations.

The bank maintains headquarters in Lagos, Nigeria’s financial capital and largest city. The chairman of the 15- Member Board of Directors is Jonathan Long and Ladi Balogun serves as the Group Managing Director and Chief Executive Officer. As of July 2012, it maintains over 310 networked branches in all 36 states of Nigeria, making it the 7th largest Nigerian bank, by branch network.

First City Monument Bank Plc (FCMB), Gusau Branch is one of its rural networked branches and it is situated at No. 105 Sanni Abacha Way Gusau – Zamfara state. The branch integrated Fin Bank Plc into its existing operations in 2012 and it comprises of nineteen (19) staff, ranging from the branch manager, who is by name Chinyere Osajie to other personnel that are committed to serving the interests of the shareholders, customers and the community at large, with focus on investment banking, transaction banking and Retail banking.


  1. Absorption: this is the combination of two or more firms into an existing one, where the purchasing company survived and the selling company losses its identity.
  2. Acquisition: this refers to the acquisition of effective control over the assets or management of another company without any combination of business.
  3. Asset: an asset is a resource with economic value that an organization owns or control with the expectation that it will provide future benefit.
  4. Alchemy: this is the power to do something so well that it seems mysterious and magical.
  5. Business: this refers to any lawful activity which involves the production and distribution of goods or the rendering of services for the purpose of making profit.
  6. Consolidation: the combination of two or more firms into an entirely new firm while the old ones cease to exist.
  7. Corporate restructuring: this is the change in ownership structure or business or assets mix of a company with a view to enhance the shareholder’s value.
  8. Holding company: this refers to a parent corporation that owns sufficient voting stock in one or more companies so as to have efficient control over them.
  9. Liabilities: refers to a company’s legal debts or obligations that arise during the course of business operations.
  10. Sample size: refers to the number of entitles (subjects) in a subset of population selected for analysis.
  11. Shares: a unit of ownership that represents an equal proportion of a company’s capital.
  12. Strategy: this is a plan of action designed to achieve set goals and objectives.
  13. Subsidiary: a company which has more than half of its voting shares owned by another company (the parent company).
  14. Synergy: refers to economics realized in a merger where the performance of the combined firm exceeds that of its previously separate parts. It is often expressed as 1+1=3.

Takeover: this is an assumption of the control of another firm through the purchase of 51 percent or more of its voting shares or stock.


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