CHAPTER ONE

1.0 INTRODUCTION

Merger and acquisition as a business combination cannot be over

emphasized. Merger and acquisition can either increase or decrease

the financial base of a firm. The most important thing is the

management team choices of adopting a proper concept that will

enhance better evaluation.

Generally, before a company merges together that is the predator

company and that of the target company they must be thoroughly

appraised using realistic models and method of appraisal. This study

attempts to highlights the survival and growth of Nigeria companies

especially the oil industry with specific concern on mergers and

acquisition scheme in Nigerian economy.

Where two or more autonomous companies come together under a

common control or where there is formation of a new company which

acquires the assets (and possibly the liabilities) of two or more

existing companies or on the other hand, where a company (holding

company) is taking over the voting share of another company

(subsidiary), a merger or acquisition has invariably occurred.

The current predicament in Nigeria calls for pulling together of

resources and it more efficient utilization for overall economic

rationalization, survival and growth. However, one of the instruments

to achieve survival and growth in business and companies that will

1

have direct effect on the economy of the country is business

combination which may take the form of merger, acquisition,

absorption, consolidation etc. as regards the topic of this study, the

meanings of merger and acquisition are hereby defined below:-

Generally, the word merger implies the combination or fusion or

rather coming together of two or more formerly independent business

units into one organization with a common ownership and

management.

Merger is a form of business combination where two companies join

together with one being voluntarily dissolved without being wound up

by having its interest, resources, shareholders, asset, and liabilities

taken over by the other company.

In recent usage, merger is a special case of combination where both

merging companies join together on equal terms and at the same

time bringing under the control of a single management, the

management of two independently operated businesses.

Merger is the combination of two or more business units, which pull

or unite together their resources and interest with a view to achieving

a continuing mutual sharing in the benefits and risks that may occur.

Scientifically put, merger is the fusion of two or more enterprises in

which no new concern (entity) is created.

The word acquisition means taking over, therefore, acquisition

business means take over or purchase of business. Acquisition arise

2

when a company purchases the business and undertaking of another

company where the acquired company retains its legal existence and

continues its business but assumes the status of a subsidiary

company to the acquiring company, which automatically becomes a

holding company.

Acquisition or take over business is the union of two or more formerly

independent businesses or firms under a single ownership

accomplished by the complete purchase of one companys stock by

another. The acquired company then ceases to be a separate entity

but a subsidiary of the acquiring company.

An acquisition is a business combination that is not a union of interest

but a purchase of interest. Acquisition is any business combination

that is not a merger. In which case, the shareholders of the acquired

party do not have a continuing interest in the combined entity but

instead sell their shareholding for cash or other non equity

consideration since they have no control over the business any

longer, as long as the parties are not combining on equal terms.

According to innocent okwuosa (2000) an acquisition is any business

combination that is not a merger.

1.1 HISTORICAL BACKGROUND OF ELF OIL NIGERIA LIMITED

Elf oil was incorporated as a private limited liability company on 20th

November, 1981 to engage in the business of marketing petroleum

products, lubricants and chemicals. The companys authorized share

capital on incorporation was 1,000,000 divided into 2,000,000

ordinary shares of 50k each.

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Right from this time (November 1981) the authorized share capital off

Elf Oil has been receiving increment. Up to June 2000 when the

merger took effect the share capital and increased to N600,000,000

divided into 1,200,000,000 ordinary share of 50k each out of which

300,000,000 divided into 600,000,000 ordinary share of 50k each

were issued and fully paid.

1.2 TOTAL NIGERIA PLC

Total Nigeria Plc was incorporated as a private limited liability

company on 1st June 1956 as total Oil Product (Nigeria) Limited to

market petroleum products throughout Nigeria.

In 1978, the company became a public limited liability company and

was granted a listing on the Nigeria stock exchange in April 1979,

after 40% of its equity capital was sold to the Nigerian Public in

compliance with the provision of the now repealed Nigerian

Enterprises Promotion Decree 1977( the NEP Decree 1977), the

companys authorized share capital on incorporation was N1,000,000

divided into 50,000 ordinary share of N20 each.

Right from 1956, the authorized capital of Total Plc has subsequently

received changes. From 1956 to June 1978, the authorized capital of

N1, 00.00 divided into 50,000 share of N20 each increased to N22,

500,000, capital divided into 1,125,000 shares. From October 1978 as

the shares kept on increasing, the per value was denominate to 50k

per share. Up to the year 2000, the authorized share capital to Total

4

had increase to N112, 000,000 divided into 224,000,000 ordinary

shares of 50k each.

1.3 OBJECTIVES/PURPOSE OF THE STUDY

The study intends to examine the role of mergers and acquisition in

the survival and growth of Nigeria companies.

To investigate into business in which merger and acquisition

can be of greatest use in Nigeria.

To find ways of making mergers and acquisition attractive to

Nigeria companies

To show the benefits of mergers and acquisition to Nigerian

economic development.

To explore into the reason why Nigerian indigenous company

are not involved in mergers and acquisition and other related business

combinations.

1.4 SIGNIFICANCE OF STUDY

The study intends to provide a means of survival, growth for present

and future companies in Nigeria through the creation of awareness of

the research topic.

The knowledge of mergers and acquisition in business community as

a way out of financial distress will enhance the nations economic

development in terms of economic down turn and recommendations

made will be of immense importance to the companies of study.

The study will serve as a reference to student in the accounting

department of Delta state university, Abraka and other students

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carrying out further research on the topic and other related

disciplines. The study will add to the existing literatures on mergers

and acquisitions.

1.5 SCOPE AND LIMITATION OF STUDY

The research extensively covers the historical background of the

companys study, Total Elf, the state of the new company after

acquisition, the research instrument used i.e. primary source,

personal interview and secondary source, published information and

financial publications. More over, the research covers the

determination of the related business combination similar to mergers

and acquisition e.g. absorption, consolidation etc. the limitations of

the study include the following;- the cost of transportation to Total

headquarters in Victoria Island, typing and photocopying have

restricted the scope of the study areas of research work which could

adequately be covered.

The difficulties in getting many interviewers to clarify some points.

1.6 DEFINITION OF TERMS

The key term or word use in this study is hereby defined:-

Holding Company: A holding company is a company that has

another company that it controls.

Subsidiary Company: A company is a subsidiary if it is controlled

by a holding company.

6

Authorized Share Capital: The capital stated in the memorandum

of association with which the company wishes to commence the

business.

Ordinary Shares: The shares of the owners of the company, on

which dividends are paid according to profit left after payment of

dividend on preference shares which attract fixed dividend.

Issued Shares: There are part of the authorized shares issued out

to the public for subscription.

Fully Paid: This represents the issued shares that have been fully

paid for by the public; that is, the nominal value on the shares has

been fully received by the company.

Par Value: this is the value at which a share is to be sold to the

public. It is otherwise means nominal value.

1.7 SUMMARY/OUTLINE OF STUDY

In summary, business combinations Is a means expansion, Growth

and acquisition are strategies of maintaining expansion, Growth and

profitability level in companies business. Merger acquisition and other

business combinations terms like consolidation.

Absorption, take over, pulling of interest, amalgamation etc, are used

to describe the business transaction between one firm and other.

However, they all identify technical meaning and are used

interchangeably.

7

The companies of study TOTAL OIL and ELF OIL merged in the year

2000. With Elf Oil being dissolved voluntarily without being wound

up, in which TOTAL acquired all the assets, liabilities shares and

shareholders of ELF under the name TOTAL FINA ELF.

8

REFERENCES

Ican Study Text (1988) pg 101 -200 PE II Financial Management,

Lagos May Associates

Innocent Okwuosa (2000): Group Accounts. Safe Publication Ltd,

Lagos.

Kam, Veron (1990): Accounting Theory 2nd Edition (New York, John

Wileg and Sons Inc.)

Mathur I. (1979): Financial Management, Macmillan Publication

Company Incorporation New York

Okwuosa I. (2000): Group Account Published by Arnold Consulting

Ltd, Martins Street, Lagos.

Pandey I.N (1990): Financial Management (New Delhi, Vikas

Publishing)

Jennings A.R (1990): Financial Accounting Manual, 2nd and 3rd

Edition Low Priced Book Scheme (ELBS) Published.

TOTAL FINA ELF, TOTAL /ELF 2001 scheme of merger 2001.

9

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 INTRODUCTION

Mergers and acquisition are very common in the developed countries

like Britain and Unites State of America but are to be very prominent

in the scheme of events in Nigeria. However, it is now coming to the

awareness of Nigerias that, to achieve the objectives of probability

and growth among the key objectives of business concern, the

strategies of Merger, acquisition, consolidation, takeover, business,

absorption etc. must be developed and the effect of our cultural

background in terms of theory of assets ownership (who owns assets

and takes control) must be eradicated in order to consummate the

strategy of merger and acquisition.

In actual fact, growth has been a way of life for business units

virtually from the day business activities began in early times. Growth

can be accomplished either within the business unit or through

combination with accomplished companies either within business unit

or through combination with other business units, organizations,

merger, acquisition, absorption, take over, consolidation,

amalgamation.

2.2 CONCEPT OF BUSINESS COMBINATION MERGER

According to the companies Allied Matter Decree of 1990 (CAMD

1990) section 591, merger is any amalgamation of the undertaking or

10

any part of the undertaken or interest of two or more companies or

the undertaken of one or more bodies corporate.

Pandey I.M (2000) defines mergers as the combination of two or

more companies unto one company

International Accounting Standard No. 22 (IAS 22) defines merger as

the uniting or pooling of interest of two or more business

An acquisition is defined by international accounting standard No 22

as a Business combination that is not a uniting of interest

Aamiakor in his paper mergers and acquisition defined acquisitions

as including all business and corporate organizational and operational

devices and arrangement by which the ownership and managements

of independently operated properties and business are brought under

the control of a single management. Examples of acquisition of

businesses are John Holt Plc acquire Haco Ltd 1963, Lever Brothers

Nigeria Plc and Lipton of Nigeria in Lever Brothers Nigeria and

Cheesebrough Product in 1988.

ABSORPTION

Absorption is a combination of two separate business entities in which

the business of one is transferred to another and the transferor (the

acquired company) voluntarily winds up or dissolves. An example of

business combination which can be described as absorption is the

combination of the companies of case of study. Total and Elf oil as

trading Total Plc takes over the assets and liabilities and operation of

11

Elf Oil Nigeria limited and Elf Leases trading and UBA acquired STB

2005.

CONSOLIDATION

A consolidation is a form of merger according to Pandy I.M (2000) is

a combination where all companies are legally dissolved and a new

entity is formed.

A consolidation as a form of business and economics, a consolidation

is the union of two or more formerly business or firms into a third or

new firm under a single ownership.

Consolidation is most suitable to size business, operating on a

relatively small scale.

AMALGAMATION

Amalgamation is a business combination that involves small scale

business, where a holding company is usually established to acquire

all or a majority holding of the voting shares of the other business

which continue in existence as the subsidiaries of the holding

company.

2.3 CLASSIFICATION OF BUSINESS COMBINATIONS

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Various classification of business combinations have been made by

different authors but this write up will focus on two major

classifications which are:

Classification based on economic effect

Classification based on legal status.

CLASSIFICATION BASED ON ECONOMIC EFFECT

The extend to which a combination may produce economic gains or

effect depends on whether the business ventures of combining

partners are related or not. Therefore, the management of the

acquiring company should clearly define their organizational strategy

whether it is vertical, horizontal or conglomerate.

HORIZONTAL COMBINATION

This is a combination to two or more firms in the same business, in a

similar type of production and in the same manufacturing or

distribution level. For example, the 1985 merger of Nestle and

carnation where both companies manufacture food product.

VERTICAL COMBINATION

This is a combination of two or more firms in different stages of

production and distribution level. It is a line combination which can

take the form of a forward or backward integration.

FORWARD INTERGRATION

13

Occurs if a company combines with its customer to move up towards

the ultimate market.

BACKWARD INTERGRATION

This occurs if a company combines with its supplier of materials that

will provide its basic impact.

CONGLOMERATE COMBINATION

Conglomerate combinations takes place between two or more firms

whose businesses are not directly related or whose products have

little or no resemblance to one another. This is done to reduce risk as

the business resources would be diversified. For instance, if a

company, the manufacturer of babies cloths combines with another

company of manufacturing textiles.

CLASSFICATION BASED ON LEGAL STATUS/FORM

The main categories to be discussed here are statutory mergers,

statutory consolidation, and sales of assets and lease of assets.

STATUTORY MERGER

Under statutory merger the merger company that is taken over by

another company ceases to exist as a separate entity. The

combination id based on a tax free exchange of shares where all the

assets and liabilities of the acquired company are assumed by the

surviving company.

STATUTORY CONSOLIDATIONS

14

Under statutory consolidation, both firms merger into a new in and

both cease to exist as separate entity.

Shares of both companies are exchanged for sales of the new

companies where the new company assumes all the asserts and

liabilities of both companies.

SALES OF ASSETS

Under the sales of assets are company that sells all its assets to

another where in addition, the buying company may also agreed to

assume some or all of the vendor companys liabilities which the

purchase payment may be in cash, securities or combination.

LEASE OF ASSETS

Lease of assets have to do with renting out an asset like plant,

machinery equipment etc, for a long period of time, we can lease it

out to another asset (lessor) discontinues its operation; we can lease

it out to another company and thereby derive income from the rent,

which accrues under the lease. This situation is usually brought about

by persistent losses in the lessor company either through this

management or often in Nigeria context, through lack of raw

materials.

2.4 REASONS FOR MERGERS AND ACQUISITION

Numerous factors account for merger and acquisition in any business

sector irrespective of the constraints inherent in such

Sectors or ventures. Some of these factors which could be called the

reason for mergers and acquisitions are discussed below:-

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GROWTH

Expansion is a major object or business organization. In corporate

annual report, top management often lists growth among its primary

goals. Some companies believe that merging or booing an on going

concerns aids growth than breaking into or establishing a new market

which in reality helped the growth of some Nigerian companies e.g.

Lever Brothers Nigeria Plc , John Holt, Ltd.

FINANCING

The survival and progress of any business are determined by finance.

Firms with excellent growth potential may find it difficult to achieve

this potential as a result of lack of access to financing. In a situation

like this, it is reasonable for such firm to merger with cash rich or

highly liquid firm.

ECNOMICS OF SCALE IN OPERATION

Mergers and acquisitions may result in economics of scale in

operation in terms of saving human and material resources that is,

cost reduction in the area of ware housing, depot charges, site

utilization, personnel, planning and shipping. Moreover, allocations of

fixed cost over a large volume of sales and thereby obtain savings on

production cost by eliminating duplicative five costs leads to merger

and acquisition.

DIVERSIFICATION

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A company may merge with another company it is wished to diversify

in production, risks maturity and space which may be for securing

reasons.

AVIODANCE OF EXPENSES OF GOING PUBLIC

A privately owned company may combine with publicity owned

company to avoid the expenses of going public i.e. listing

requirements for its quotation in the stock exchange market and also

avoid the risk of under subscription.

COMPETITION

Elimination of competition sometime might be a concrete reason for

business merging or acquiring one another.

SYNERGY

Merger and acquisition in most cases, produces synergetic effect in

companies. In financial context, synergizing means that the combined

firms is doing better or are having improved profit than when they

where operating as separate entities.

TAKEOVER

Pandy I.M (2000) defined take over as obtaining control over

management of a company by another. It is like acquisition but under

the monopolies and restrictive trade practice Act, take over means

acquisitions of not less that 25% of the voting power in a company.

2.5 PROBLEMS ASSOCIATED WITH MERGERS AND ACQUISITIONS

17

It should be apparent that the joining with or purchase of another fir

is merely a complex investment project. As such, it must satisfy the

same criteria and be justified on the same ground as any other

investment opened to a firm. The problems associated with mergers

and acquisitions are hereby discussed below:-

Government, shareholders, labour union and individual workers alike

may disapprove of a merger/acquisition because of fear if it leading to

creation of monopolistic powers, retrendement or being against public

interest. In order to evolve a strong and virile economic and financial

system in which its citizens would participate, government therefore

strive to eliminate imperfections and abuses that may be detrimental

to the orderly development of the political, economic and financial

system.

Perhaps the most difficult job in mergers/acquisitions is the handling

of people. The fact must be recognized objectively that people/groups

who are likely to be affected my mergers, their feeling and views

deserve understanding and mutual respect. Also, due to the limited

business vision and traditional confrontations between staff and

management, the job of notifying, briefing, education the non

management staff to secure their support is usually more difficult.

FINANCIAL DIFFICULTIES

This poses a lot of concern to the firm. The cost and the future

inflow, in ascertain cost, it is necessary to establish the alternative

18

value to its owners of the firm under considerations for purchase.

That is the value from continued operation or selling out to third party

and this calls for a rather different techniques that the applicable to

normal internal investment projects.

EXISTENCE OF GOODWILL

The assets of going concern usually include goodwill i.e. the

reputation a business enjoys with its customers which gives the

business value above its physical assets value. Since goodwill is an

intangible assets, its valuation usually poses problem in situation of

merger/acquisitions.

PERSONAL PROBLEMS

Management and labour are often a critical a factor affecting the

profitability of the new company which variants through investigation

in view of their financial implications, firstly, the level of wages and

salaries in the firm will need to be compared to those rival and

neighboring firms as a re requisite to assessing long term labour

costs.

Other major financial problems are the setting of outstanding

obligations, the right of existing shareholders, minorities, etc, when a

firm is purchased which has redeemable preference shares,

debentures secured or insecure loans, banks overdraft etc. there is

often the opportunity and sometimes the obligation to redeem such

finance at the time of purchase. These complications do not exist in

the case of internal investments.

LEGAL FRAMEWORK

Merger arrangement is an exhilarating game and like all business

games, it is not a fun game. It has its players and special rules and

19

there are both winners and losers. As in all games the rules change

with time and need.

Most regulatory procedures for mergers and acquisition are aimed at

the antirust implication of such merger arrangements. In other words,

preventing the incidence of such mergers becoming monopoly. Thus,

it would be rational to reject any proposal for the scheme if it is likely

to result in monopoly or to operate against public interest. Unlike USA

and the United Kingdom, there are no formal regulations on mergers

acquisitions in Nigeria. The companies and Allied Matters Decree 1990

merely stipulate the procedures and approval for reconstruction and

merger, these are highlighted below.

2.6 PROCEDURES AND APPROVAL FOR RECONSTRUCTION AND

MERGER

Where under a scheme proposed for a compromise arrangement or

reconstruction between five or more companies, the whole or any

part of the undertaking of the property of any company concerned in

the scheme (the transfer company) is to be transferred to another

company, the court may on the application of any of the companies

to be affected, order, separate meeting of the companies to be

summoned in manners as the court may direct.

If a majority representing not less than three quarter in value of the

shares of members, being present and voting either in person or by

proxy at each of the separate meetings, agree to the scheme, the

scheme shall be referred to as the Securities and Exchange

Commission for approval.

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If the scheme is approved, an implication may be made to the court

of one or more of the companies and the court shall sanction the

scheme, and when so sanctioned, the same shall become binding on

the companies and the court may by order sanctioning the scheme or

by any subsequent order make provision for all or any of the following

matters:-

The transfer to the transferee company of the whole or any part of

the undertaking and of the property or liabilities of any transferor

company.

The allotting or appropriation by the transferee company of any

shares, debentures, policies or other like interest in that company

which under the compromise or arrangement are to be allotted or

appropriated by that company to or for any person.

The continuation by or against the transferee company of any legal

proceedings pending by or against any transferee company.

The dissolution, without winding up of any transferor company. The

provisions to be made for any persons who within such manner as the

court may direct, dissent from the compromise or arrangement.

Such incidental, consequential and supplemental maters are

necessary to secure that the reconstructions or merger shall be fully

and effectively carried out.

An order under paragraph (IV) of subsection C of this secures that

the reconstruction or merger shall not be made unless:-

21

The whole of the undertaking and the property assets and liabilities of

the transferor company are being transferred into the transferee

company, and of the court is satisfied that adequate provision by way

of compensation or otherwise have been made with respect to the

employees of the company to be dissolved.

Where an order under this section provides for the transfer of

property or liabilities, that property shall be virtue of the order, be

transferred to and become the liabilities of the transferee company,

and in the case of any property, if the order so directs, freed from

any charge which is by virtue of the compromise or arrangement to

cease to have effect.

Where an order is made under this section, every company in relation

to which the order is made shall cause an office copy there of to be

delivered to the commission for registration within 7 days after the

making of the order and a notice of the order shall be published in

the gazette and in at. least one national newspaper and if default is

made in complying with the provisions of this subsection, the

company and every officer of the company who is in default shall be

guilty of an offence and liable to a fine of N100.

In this section:-

Property includes property rights and powers of every description.

Liabilities includes duties of every description notwithstanding that

such right, power and duties are of a personal character which could

not generally be designed or performed vivaciously.

22

Company where used in this section does not include any company

other than a company within the meaning of this decree

2.7 POWER TO ACQUIRE SHARES IF DISSENTING

SHAREHOLDERS

Where a scheme or contact involving the transferee of shares of any

class of shares in a company (transferor company) to another

company, whether a company has within 4 months after the making

of the offer in that behalf by the transferor company been approved

by the holders for not less than nine tenths in value of the share

whose transfer is involved (other than shares already held at the date

of the offer by or by a nominee for the transferee company, or its

subsidiary), the transferee company may at any time with 2 months

after the expiration of the said 4 months give notice in the prescribed

manner to any dissenting shareholder that it desires to acquire his

shares, and when such notice is given, the transferee company shall

unless on an application made by the dissenting shareholder within

one month from the date on which the notice is given the court thinks

fit be entitled and band to acquire those shares on the terms on

which, under the scheme or contract, the shares of the approving

shareholders are to be transferee company, provided that where

share in the transferor company of the said class or classes as the

shares whose transfer is involved are already held as the shares

whose transfer is involved are already held as aforesaid to a value

greater than one tenth of the aggregate of their value and that of the

share whose transfer is involved, the foregoing provisions of this sub

section shall not apply unless:-

23

The transferee company offers the same terms to all holders of the

shares whose transfer is involved, or where those shares includes

shares of different classes, of each of them and;

the holders who approved the scheme or contracts besides holdings

not less than nine tenths in value of the shares (other than those

already held as aforesaid) whose transfer is involved, shall not be less

than three quarters in number of the holders of these shares.

24

REFERENCES

Alvemeche, K.O (1996): Accounting for Managers and Acquisition of

Business in Nigeria.

Okwuoas I. (2000): Group Accounting Published By Arnold

Consulting Ltd, Martins Street, Lagos.

I.A.S (2002): International Accounting Standard, Paragraph 2, No 22

Jennings A.Z (1990): Financial Accounting Manual 2nd and 3rd

Edition, Education Low Priced Books, Scheme (ELBS)

Publisher.

Ammer C. (1977): Dictionary of Business and Economics Published

New York Free Press.

Mathur I. (1979): Financial Management. Macmillan Publication

Company Incorporations, New York.

Camp (1990): Companies and Allied Matters Decree Published by

Federal Republic of Nigeria

25

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 INTRODUCTION

This chapter examines the methodology of research to be adopted in

this research. The chapter presents a comprehensive description of

the means by which necessary data are obtained and the method

adopted for presentation and subsequent analysis of the research

data.

It will treat the various methods adopted in carrying out and

experiment the research hypothesis.

This chapter will further examine and X-ray various methods such as

the data collection method, sampling procedures, and plan, methods

of data analysis, and the procedures adopted in administering the

research questionnaire. Thus, the importance of this chapter cannot

be over emphasized.

3.2 RESEARCH DESIGN

This could be described as the blue print that allows a researcher to

provide solution to the problems to the study. The research design is

also serves as a guide to collect, analyze and interpret research

observations, it also defines the extent of generalization of research

findings.

For the success of this study, survey method which was defined by

Donald and Del (1972) as the systematic gathering of information

from respondent for the purpose of the population of interest. This

26

will be used extensively to obtain broader ranger of information from

various categories of staff within the organization of TOTAL ELF NIG

PLC. Will be employed as the case study.

3.3 DATA COLLECTION METHOD

The data for this study will be collected through primary and

secondary sources to carry out this study to its logical conclusion.

PRIMARY DATA

This describes data obtained through primary sources such as survey

methods (questionnaire) et cetera. In this research study, the primary

sources to be employed include the use of well structured

questionnaires, and the conduct of personal interviews with the staff

of TOTAL ELF NIG. PLC.

SECONDARY DATA

This includes, data sourced through journals, textbooks, prepared

articles etc put differently, it describes data sources through not

originally prepared for that study. The data in the study were sourced

through journals written articles and textbooks on the topic.

3.4 RESEARCH INSTRUMENT

The research instruments used were the questionnaire and the

interview method.

QUESTIONNIARE

This questionnaire method describes a source or primary data in

which series well structure question are prepared and administered to

27

a defined study population. These questions are characterized by

preciseness and are designed in simple and straightforward form.

This is designed in order to test various hypothesis formulated and to

obtain more information regarding the subject matter. The

questionnaire consists of two main sections (A & B). The section A

contains questions relating to the respondents biological data while

section B contains questions relating to the topic of the study. The

objective of this is to see how the respondents personal qualities

affect its answer..

For this study, close ended questionnaire method will be employed.

This is used as a supplement to the questionnaire, it is another

method of investigation furthermore, it can be used to obtain answer

that were impossible to be structured in the questionnaire. It also

gives opportunity for the people who cannot fill questionnaires to

express their views or and add their views or add their own quota

through their verbal expressions.

3.5 SAMPLING PROCEDURE

The sample: this describes the total number of element, which is

under discussion and from whom information are desired. The

population size was made up of the staff of TOTAL ELF NIG. PLC the

sample size chosen was 40 staffs.

3.6 VALIDITY OF DATA

Percinger N. (1973) validity is the degree to which a measuring

instrument measures what is designed to measure. Every measuring

instrument is designed for a specific measurement. It is correctly

28

design. It measures what it is supposed to measure. If its design

process is affected by error, the measurement will not be correct. The

validity research instrument gives credibility to the research

instrument.

3.7 METHOD OF ANALYSZING DATA

In analyzing the data of the study, the chi square statistical technique

will be employed or applied.

The chi square statistical technique in testing the research hypothesis

by comparing the on served frequencies and the expected frequency

and then drawing a conclusion in view of the decision rule formulated

initially.

Chi square test statistical is given below

X2 (O-E)2

E

When E = summation

E = expected frequency

O= Observed frequency

Decision criterion for the validation of hypothesis

The value of chi square is computed from the above formula and the

appropriate null Hypothesis is started. The decision rule is that if the

computer value of chi square is greater than that table value at the

appropriate level of significance (5%) and degree of freedom, we

reject the null hypothesis (Ho) and accepted the alternative

hypothesis (Ho) and accept the alternative hypothesis.

29

The number of degree of freedom depends on the number of

constraints imposed on the data for a contingency table.

The degree of freedom is calculated on by using the formula.

Where df = (r-I) (c-I)

r= the number of rows

c= the number of columns

df= degree of freedom

3.8 LIMITATION OF METHODOLOGY

Despite the effort put into this research, some problems surfaces and

the gathering of data from this chapter. The problems include:

Some of the respondents failed to return the questionnaire at

the appropriate time.

Some respondents didnt return the questionnaire at all.

The inability to conduct interview with some of the top

management staff of the organization.

Financial constraints in carrying out the research work.

Time limitation

30

REFERENCES

Adams S.O (1997): Statistics for Beginners, Evans Brothers Ltd.

Ibadan.

Nnmadi A. (1996): Research Methodology in the Behavioral

Sciences, Longman Nig Plc. Lagos.

Lury D.A (1984): Data Collection in the Develop Countries, Great

Britain Oxford University Press, Ltd London.

31

CHAPTER FOUR

4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION

4.1 INTRODUCTION

This chapter attempts to highlight the data collected, through the use

of primary and secondary data in analyzing the validity and reliability

of the data.

A questionnaire method was adopted in collecting the respondents

response. Fifty five (55) questions were distributed but (40) forty

questions were returned.

4.2 ANALYSIS OF RESPONDENTS

Data presented and analyzed in the study were elicited from the

randomly selected respondents is indicated in the methodology.

In this section, an attempt was made to analyze respondents

responses to the questions structure forming the backbone of these

research findings.

To interpret and analyze the data, the use of number and percentage

is adopted as (40) forty and 10% respectively represents below is the

analysis of the respondents profile.

32

Table 4.1: Sex of Respondents

Sex Number of respondents Percentage (%)Male

Female

30

10

75

25Total 40 100

Table 4.1 shows that 75% of the respondents are male, while 25% of

the respondents are female.

Table 4.2

Department Number of respondents Percentage (%)finance

technical

personnel

accounts

audits

5

2

3

10

20

12.5

5

7.5

25

50Total 40 100

The analysis in table 4.2 shows that of the total population sampled,

(40) among various departments, the audit department constitute the

largest population of 50%, Account department 25%, finance 12.5%,

personnel 7.5% and technical department 5%.

33

Table 4.3: Status of Respondents

Status Number of

respondents

Percentage

(%)Senior executive

Management staff

Junior staff

10

20

10

25

50

25Total 40 100

Table 4.3 shows the status of management staff constitute the largest

population of 20 (50%) of the staff, while senior executive is 10

(25%) and junior staff is 10 (25%).

Table 4.4: Age of Respondents

Sex Number of respondents Percentage

(%)25-34 years

35-44 years

45 years and

above

10

25

5

25

62.5

12.5

Total 40 100

From the table 4.4, shows that Age 35-44 consist the largest

population sampled (62.5%) while age 25-34 years falls into 25% and

45 years falls into 12.5% of the total respondents sampled.

34

Table 4.5: Qualif ications of Respondents

Qualification Number of

respondents

Percentage

(%)SSCE/GCE O level

OND/NCE/ATT

HND/BSC

ACCA, ACA, ACIB

MBA, MA, MSC, MPA

-

5

20

10

5

-

12.5

50

25

12.5Total 40 100

Table 4.5 shows that HND/BSC is 20 (50%) of the total respondents,

while ACCA, ACA, ACIB is 10 (25%), OND/NCE, AAT is 5(12.5%) and

MBA, MA, MSC, MPA is 5 (12.5%) of the population sampled.

Table 4.6: Length of Service

Length of service Number of

respondents

Percentage (%)

1-5

6-10

11-15

16 years & above

2

8

25

5

5

20

62.5

12.5Total 40 100

The table 4.6 above shows clearly that 11-15 years of length of

service constitute the 25 (62.5%) of the population, 6-10 years is

8(20%), 16 years and above and above is 5 (12.5%) and 1-5 years is

2(5%) of the total population sampled.

35

Table 4.7: Do You Understand What Merger and

Acquisition Means?

Options Number of respondents Percentage (%)Yes

No

20

20

50

50Total 40 100

From the analysis above in table shows that 50% of the respondents

understand what is meant by merger and acquisition, while 50% of

the respondents do not.

Table 4.8: Is Merger and Acquisition a Significant

Economic Tool for Business?

Options Number of respondents Percentage (%)Yes

No

20

20

50

50Total 40 100

From the table 4.8 shows clearly that 50% of the respondents agreed

that merger and acquisition is significant economic tool for business

revitalization some do not agree.

Table 4.9: Is Merger and Acquisition the Best Ways to

Revamping a Fail ing Business and Enhancing Business

Growth?

Options Number of respondents Percentage (%)Yes 35 87.5

36

No 5 12.5Total 40 100

The table in 4.9 indicates that 87.5% of respondents are of the

opinion that merger and acquisition is the best way of revamping a

failing business and enhancing business growth, while 12.5% of the

respondents disagree.

Table 4.10: Can Business Growth and Efficiency be

Divorced from Merger and Acquisition?

Options Number of respondents Percentage (%)Yes

No

20

20

50

50Total 40 100

In the above table shows that 50% of the respondents disagrees as

50% agree to the fact that business growth and efficiency divorced

from merger and acquisition.

Table 4.11: Merger and Acquisition Does Not Enhance

Growth and Efficiency of Business Operation

Options Number of respondents Percentage (%)Yes

No

20

20

50

50Total 40 100

From table 4.11 states clearly that 50% of the respondents agrees

and 50% of the respondents disagrees to the option that merger and

acquisition does not enhance growth and efficiency of the business

operation.

37

Table 4.12: Does Merger and Acquisition Enhance Growth

and Ensure Efficient Business Operation?

Options Number of respondents Percentage (%)Yes

No

30

10

75

25Total 40 100

Table 4.12 reveals that 75% of the respondents are of positive

support that merger and acquisition enhances growth and ensures

efficient business operations, while 25% of the respondents disagree.

4.4 ANALYSIS AND TEST OF HYPOTHESIS

The general purpose of hypothesis or significance testing is to

examine the degree of validity and reliability of hypothesis and the

degree of freedom. The chi square test is given as:

The chi square test is given as:

X2 = (0-E) 2

E

Where = Summation

O= observed frequency

E = Expected frequency

The statistical test at 5% level of significance that:

Answers given by the respondents are denoted by the term observed

frequencies (0) while the theoretical frequency is denoted by term

expected frequency (E).

Expected frequency = (Row total x Column Total)

Grand total

38

HYPOTHESIS TESTING

Ho: Merger and Acquisition does not enhance growth and efficiency

of Business operation

Hi: Merger and Acquisition enhance growth and efficiency of business

operation

DECISION RULE

If the chi square calculated values exceeds the Null Hypothesis (Ho)

and then accept the Alternative Hypothesis (Hi).

HYPOTHESIS I

Options

Questions

Total 7 8 9 10

Yes

No

30

10

20

20

35

5

20

20

105

55Total 40 40 40 40 160

The derivation of expected frequency is as follows:-

Expected frequency = (Row total x Column Total)

Grand Total

F (1.1) = (105 x 40) 160 = 26.3

F (1.2) = (105 x 40) 160 = 26.3

F (1.3) = (105 x 40) 160= 26.3

F (1.4) = (105 x 40) 160 = 26.339

F (2.1) = (55 x 40) 160 = 13.8

F (2.2) = (55 x 40) 160 = 13.8

F (2.3) = (55 x 40) 160 = 13.8

F (2.4) = (55 x 40) 160 = 13.8

SUMMATION OF THE CHI SQUARE CALCULATED VALUE

Cells Observed

frequenc

y

Expected

frequency

0-E (O-E)2 (O-

E)2/E

F (1,1)

F (1,2)

F (1,3)

F (1,4)

F (2,1)

F (2,2)

F (2,3)

F (2,4)

30

20

35

20

10

20

5

20

26.3

26.3

26.3

26.3

13.8

13.8

13.8

13.8

3.7

-6.3

8.7

-6.3

-3.8

6.2

-8.8

6.2

13.69

39.69

75.69

39.69

14.44

38.44

77.44

38.44

0.52

1.51

2.88

1.51

1.05

2.79

5.61

2.79 X2 CALCULATED 18.66

Chi square calculated value = 13.939

Chi square (x2) table value at 5%

Level of significance

Degree of freedom (DF) = (R-1) (C-1), 0.05

(2-1) (4-1)

(1) (3), 0.05

7.81

40

COMMENTS

Since the chi square calculated value of 13.939, we reject the null

hypothesis and then accept the alternative hypothesis, which states

that merger and acquisition, is effective and effective strategy for

failing business organization.

4.5 SUMMARY OF HYPOTHESIS FINDINGS

HYPOTHESIS 1

Ho: merger and acquisition does not enhance growth and efficiency

of business organization

Hi: Merger and Acquisition enhance growth and efficiency of business

operation.

OBSERVATION AND DECISION

It was observed that the chi square calculated value 18.66 exceeds

the chi square tabulated value 18.66 exceeds the chi square tabulated

value of 7.81, we reject the null hypothesis and accept the alternative

hypothesis which states that: Merger and Acquisition is an effective

and efficient survival strategy for failing business operation.

REFERENCES

Adam S.O (1991): Statistical Beginners, Evans Brothers Ltd., Ibadan.

Aborishade F. (1977): Research Method, A Student Handbook

Multiform Ltd, Lagos.

Hamburg M. (1977): Basic Statistic Modern Approach, 2nd Edition

Harcourt Brace International, New York.

41

Lury D.A (1984): Data Collection in the Development Countries,

Great Britain, Oxford University Press Ltd, London.

Nnamdi A. (1996): Research Methodology in the Behavioral

Sciences, Longman Nig Plc. Lagos.

42

CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 SUMMARY

Clearly, mergers and acquisition as form of business combination are

common occurrence in time of born as well as depression. The

combinations have involved companies of various sizes and lines of

business. Very often, huge sums of money have also been involved.

In Nigeria, which perhaps has the highest frequency of business

combinations, diverse literature has been written to cover at least the

importance fact of merger and acquisition.

A merger has been defined by the companies Allied Matters Act of

(1990) as any amalgamation of two undertakings or interests of two

or more companies or the undertakings of one or more companies

and one or more corporate bodies. Merger therefore simply describes

the combination of two or more separate companies to form a single

company.

Acquisition and or take over on the other hand, describes the process

of acquiring by one company of sufficient shares in other company to

give the acquiring company control over that of the other through the

purchase of the assets (rather than shares) of the other company.

43

From the test of hypothesis conducted in chapter four using total Elf

as a case study, the followings is the summary of its findings.

Hypothesis X2 calculated X2 tabulated Degree of

freedom

Level of

significant1

1,1

18.66

18.66

7.81

7.81

3

3

0.05

0.05

HYPOTHESIS 1

Ho: Merger and acquisition does not enhance growth and efficiency of

business operation.

DECISION

Since the calculated chi square of 18.66 exceeds the table value of

7.81, we reject the Null Hypothesis (Ho) and then accept the

alternative Hypothesis (Hi) which state that:

Merger and Acquisition enhances growth and efficiency of business

Operations

HYPOTHESIS II

Ho: Merger and Acquisition is not effective and efficient survival

strategy for failing business organizations.

DECISION

Since the calculated chi square of 13.939 exceeds the table value of

7.81, we reject the Null Hypothesis (Ho) and then accept the

alternative Hypothesis (Hi) which state that:

Merger and Acquisition is an effective and efficient

survival strategy for fail ing business operations44

besides, it is important to mention that exists various forms of

business revitalization / re-engineering strategies or options of which

merger and acquisition is one and that there is one off

strategy/option proven to be the best of all, rather the choice of

business reviving option would depend on some non qualitative

factors like nature of industry, time frame, economic situation/

indices, government policies and technological advancement et

cetera.

5.2 CONCLUSION DRAWN FROM THE FINDINGS

For mergers and acquisition to be fully accepted or undertaken by

Nigeria companies, awareness must be created through organization

of workshops, seminars, symposium by reputable and corporate body

to enlighten Nigerians entrepreneurs/businessmen.

It would not be over emphasized to deduce that much stands to be

benefited by the economy through mergers and acquisitions. This is

in terms of synergistic effects, pooling of relative resources, ability to

secure more credit facilities from financial institutions, which further

increase production capacity and subsequently, qualitative and

quantitative goods and services, cut in administration and overhead

cost and the diversification advantages goes beyond long way to

improve the economy.

The scheme favours businesses that are capital intensive in nature

such as manufacturing concerns, transport and communications,

agricultural sector, oil and mining sector etc.

45

The idea of the science being foreign is gradually disappearing as

many Nigeria companies have taken to the administration of the

scheme. This is borne out of the realization of the benefits to be

gained and the fact that most companies who had undergone it have

been successful. For example, Lever Brothers Nig Plc merged with

Lipton Ltd. And Cheese borough Products Ltd, Nigeria Breweries Plc

acquiring Schweppes from Nigeria Bottling Company Plc, Smitkline

Beecham plc acquiring sterling products plc and total Nigeria Plc,

merged with Elf Nigeria Plc. (the case study).

5.3 RECOMMENDATIONS BASED ON CONCLUSION DRAWN

In view of the findings of the research study, the following is hereby

recommended that:

Merger and Acquisition should be encouraged particularly at a time

like this. Due, to economic downturn many companies are finding it

difficult to survive on their own.

Tax holidays and other relative incentives should stand one of the

benefits to be enjoyed by companies already or intending to

undertake the scheme to encourage more companies on the verge of

collapsing. Awareness created to enlighten the Nigeria Business

Community should not be restricted to only top executives but also

disseminated to the employees at various levels.

Statutory regulations should be introduced to limit the tendency of

mergers and acquisition becoming in the short run monopolistic

practices.

46

The Nigerian Accounting Standard Board (NASB) scope of legislations

is broadened to incorporate the accounting standards for mergers and

acquisitions formation.

For other sectors like the Banking industries which has been lately

besieged with distress, suggestions have gone to the four big banks

to acquire the distressed banks and some have been advised to

merge together to save the industry from loosing the confidence

bestowed on them by the public.

Suggestions have gone to big banks to acquire the distressed bank

and most banks have been merged together.

5.4 SUGGESTION FOR FURTHER STUDIES/INVESTIGATIONS

In an attempt to validate or dispel the upsurge in adverse opinion on

mergers and acquisition as a survival strategy for failing businesses,

certain areas were revealed which were beyond the scope of the

study. Thus, I suggest further studies or investigations in the

following areas.

Mergers and acquisition: Accounting implication a case study of

Smithkline Beecham Plc.

Mergers and Acquisition: A survival strategy for failing business.

Mergers and Acquisition: A tool for revamping the Nigeria economy.

47

BIBLIOGRAPHY

Aborishade F. (1997):Research Method, A Student Handbook, Multi

Form, Ltd, Lagos.

ACCA (1987): Advanced Accounting Practice, Financial Accounting

(London: BPP)

Adam S.O. (1999): Statistics for Beginners, Evans Brothers Ltd,

Ibadan.

Alvemeche K.O (1996): Accounting for Mergers and Acquisitions of

Business in Nigeria.

Ammer C. (1977): Dictionary of Business and Economic Published by

New York Free Press.

Camp (1990): companies and Allied Matters Decrees. Published by

Federal republic of Nigeria.

GEE, PAUL (1988): Book Keeping and Accounting. 20th Edition (Kent:

ELBS/Butter Worth).

Hamburg (1977): Basis Statistics Modern Approach, 2nd edition,

Harcourt Brace International, New York.

IAS (2002): International accounting standard, paragraph 3, No22

48

ICAN study text (1988): PE II Financial Management (Lagos

Associates)

Innocent Okwuosa (2000): Group Accounts. Safe Publication Ltd.

Lagos.

Jennings A.R (1990): Financial accounting Manual, 2nd and 3rd

Edition education, Low Price Books Scheme (ELBS) Publisher.

Kam, Vernom (1990): Accounting Theory, 2nd Edition (New York:

John Wiley and sons Inc.)

Lury D. A (1984): Data Collection in the Development Countries,

Great Britain, Oxford University Press Ltd. London.

Mathur I. (1976): Financial Management. Macmillan Publication

Company Incorporation, New York.

Nnamdi A. (1996): Research Methodology in the Behavioral

Sciences, Longman Nig. Plc, Lagos.

Okwuosa I. (2000): Groups Account, published by Arnold Consulting

Ltd. Martins Street, Lagos.

Pandey I.M (1990): Financial Management (New Delhi: Vikas

Publishing)

TOTAL FINA ELF, TOTAL/ELF (2001) scheme of merger

49

Lagos State Polytechnic, Lagos

School of Part time studies

Department of Accountancy

May, 2009

Dear Respondent

LETTER OF INTRODUCTION

I am a Higher National diploma final year student of the above

mention institution carrying out a research project on the impact of

Merger and acquisition of business in Nigeria.

I am presenting this project in partial fulfillment for the award of

Higher National Diploma in Accounting.

All information with the questionnaire would be treated with utmost

confidentiality.

This questionnaire is purely designed for academic purposes and

would be very grateful, if you can help in completing it.

Thank for your co-operation

Yours faithfully,

Aliu Muyideen

50

Please tick () for relevant answer where applicable.

1. SEX male { } Female { }

2. DEPARTMENT Finance { }

Technical { }

Personnel { }

Accounts { }

Audit { }

3. AGE 15 25 Years { }

26 35 Years { }

36 45 years { }

40 Year and above { }

4. Position held in the company

Senior management staff { }

Supervisory { }

Junior management { }

Clerical staff { }

Other specify { }

5. Academic / Professional Qualification

WASC / GCE O level or Equivalent { }

OND, NCE & GCE A Level { }

HND, B. sc , BA or Equivalent { }

M. sc, MBA, MA or Equivalent { }

Other specify please { }

6. How long have you been in the service?

1 5 years { }

6 10 years { }

11 15 years { }

51

16 - 20 years { }

21 25 years { }

26 years and above { }

7. Length of service

1 - 5 Years { }

6 10 years { }

11 15 years { }

16 20 years { }

21 years and above { }

8. Marital status:

Married { } Single { } Divorce { }

9. Do you understanding what Merger and Acquisition means?

Yes { }

No { }

10. Is Merger and Acquisition a significant economic tool business

revitalization?

Yes { }

No { }

11. Is Merger and Acquisition the best way of revamping a failing

business and enhancing business growth?

Yes { }

No { }

12. Can business growth and efficiency be divorced from Merger and

Acquisition?

Yes { }

No { }

52

13. Merger and Acquisition doesnt enhance growth and ensure efficiency

business operation?

Yes { }

No { }

14. Does Merger and Acquisition enhance growth and ensure efficiency

business operation?

Yes { }

No { }

15. Is Merger and Acquisition a survival strategy?

Yes { }

No { }

16. Is Merger and Acquisition an Effective strategy for revamping failing

business?

YES { }

No { }

53