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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
1
economic rationalization, survival and growth. However, one
of the instruments to achieve survival and growth in
business and companies that will 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
2
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 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
company’s 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.
3
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 company’s authorized share capital on incorporation
was 1,000,000 divided into 2,000,000 ordinary shares of
50k each.
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
4
sold to the Nigerian Public in compliance with the provision
of the now repealed Nigerian Enterprises Promotion Decree
1977( the NEP Decree 1977), the company’s 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 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.
5
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 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 company’s 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
6
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.
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.
7
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.
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.
9
TOTAL FINA ELF, TOTAL /ELF 2001 scheme of merger
2001.
10
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 Nigeria’s
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
11
According to the companies Allied Matter Decree of 1990
(CAMD 1990) section 591, merger is any amalgamation of
the undertaking or 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
12
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 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.
13
2.3 CLASSIFICATION OF BUSINESS COMBINATIONS
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
14
combination which can take the form of a forward or
backward integration.
FORWARD INTERGRATION
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
15
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
Under statutory consolidation, both firm’s 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
company’s 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
16
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:-
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
17
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
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
18
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
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.
19
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 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
20
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 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
21
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.
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:-
22
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:-
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
23
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.
24
“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
25
aggregate of their value and that of the share whose
transfer is involved, the foregoing provisions of this sub
section shall not apply unless:-
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.
26
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
27
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 will be used extensively to
28
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
29
This questionnaire method describes a source or primary
data in which series well structure question are prepared
and administered to 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.
30
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 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
31
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.
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 didn’t 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
32
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.
33
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
respondent’s 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
respondent’s 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.
34
Table 4.1: Sex of Respondents
Sex Number of
respondents
Percentage (%)
Male
Female
30
10
75
25
Total 40 100
Table 4.1 shows that 75% of the respondents are male,
while 25% of the respondents are female.
Table 4.2
Departme
nt
Number of
respondents
Percentage (%)
finance
technical
personnel
accounts
audits
5
2
3
10
20
12.5
5
7.5
25
50
Total 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%.
35
Table 4.3: Status of Respondents
Status Number of
respondents
Percentage
(%)
Senior executive
Management
staff
Junior staff
10
20
10
25
50
25
Total 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.
36
Table 4.5: Qualifications 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
12.5
Total 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
12.5
Total 40 100
The table 4.6 above shows clearly that 11-15 years of
length of service constitute the 25 (62.5%) of the
37
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.
38
Table 4.7: Do You Understand What Merger and
Acquisition Means?
Options Number of
respondents
Percentage (%)
Yes
No
20
20
50
50
Total 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
50
Total 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 Failing Business and Enhancing
Business Growth?
39
Options Number of
respondents
Percentage (%)
Yes
No
35
5
87.5
12.5
Total 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
50
Total 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 (%)
40
Yes
No
20
20
50
50
Total 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.
Table 4.12: Does Merger and Acquisition Enhance
Growth and Ensure Efficient Business Operation?
Options Number of
respondents
Percentage (%)
Yes
No
30
10
75
25
Total 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:
41
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
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
Option
s
Questions
Total 7 8 9 10
42
Yes
No
30
10
20
20
35
5
20
20
105
55
Total 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 = 26.3
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 Observe
d
frequenc
y
Expected
frequency
0-E (O-E)2 (O-
E)2/E
F (1,1)
F (1,2)
F (1,3)
30
20
35
26.3
26.3
26.3
3.7
-6.3
8.7
13.69
39.69
75.69
0.52
1.51
2.88
43
F (1,4)
F (2,1)
F (2,2)
F (2,3)
F (2,4)
20
10
20
5
20
26.3
13.8
13.8
13.8
13.8
-6.3
-3.8
6.2
-8.8
6.2
39.69
14.44
38.44
77.44
38.44
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
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.
44
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.
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.
45
46
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.
47
From the test of hypothesis conducted in chapter four using
total Elf as a case study, the followings is the summary of
its findings.
Hypothes
is
X2
calculated
X2
tabulated
Degree of
freedom
Level of
significant
1
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:
48
“Merger and Acquisition is an effective and efficient
survival strategy for failing business operations”
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.
49
The scheme favours businesses that are capital intensive in
nature such as manufacturing concerns, transport and
communications, agricultural sector, oil and mining sector
etc.
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
50
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.
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.
51
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.
52
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).
53
Hamburg (1977): Basis Statistics Modern Approach, 2nd
edition,
Harcourt Brace International, New York.
IAS (2002): International accounting standard, paragraph 3,
No22
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.
54
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
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.
55
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
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 { }
56
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 { }
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 { }
57
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 { }
13. Merger and Acquisition doesn’t 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 { }
58
59