CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

A business combination takes place when two or more business organization come together to form a single economic unit. Business combinations; could take the form of merger and acquisition where two or more previously autonomous concerns come together under common control, there is a formation of a new company, which acquires the (assets and possible the liabilities) of  two or existing  business.

Merger and acquisition are the fastest ways for a business to dramatically change its position in the market place (i.e.  acquisition of a wide market area). Either transaction can alter the fundamental dynamics of an  organization almost  over night by changing the scope or breath of products services the business  renders as well as the model under which it competes.

When the board of directors of two companies agrees to come together  (amalgamate) in the interest of both mergers  is the   right term. On the other hand, a company wanting to gain control of the another business whose board not recommend the change is said to be attempting to take over the company. Acquisition may be defined as an act of acquiring effective control by one company over an asset management of another company without any combination of companies when management of acquiring company target company  mutually and willingly agree for the takeover, its called acquisition of friendly takeover embrace the practice of merger and acquisition in the years to come. This is so because the promulgation of the Nigerian investment promotion commission decree of 1995, which gave foreigners and foreign companies unfettered access to own up to 100% in Nigerian companies and  bank. This decree repeated the exchange control act of  1962 and Nigerian enterprises promotion decree of 1988, which used to choke foreign investment interests. The old ratio of 60% to Nigerians and 40% to foreigner stipulated by Nigerian enterprises promotion  act by 1988 changed. Armed with the new investment promotion commission decree of 1995, foreign stakeholders in Nigerian companies  quoted and unquoted have been scheming and maneuvering  to exchange their  status  for the  better. The statistics from securities and exchange commission shows that the share of foreign shareholding in Nigeria quoted companies increased from 25.14% in 1994 to 25.25% in 1995. The wholly owned Nigerian Breweries Plc acquired Schweppers Nigeria Limited in 1995. In all these, the glaring fact about mergers and acquisition in Nigeria is that it is, at the moment dominated by companies that have common foreign affiliation. It appears the common affiliation enable them to reach easier agreements. On the other hand with the deregulation of the foreign exchange policy of government, more companies are expected to enter merger and acquisition.