Trends in global market
Local trends and predictions

Trends in global market

M&A trends can be triggered by regulatory directives, economic downturns and commercial advantages (ie, to increase economies of scale). According to Deloitte's predictions for 2016, M&A activities will increase due to technological disruption, efforts to scale up production and regulatory pressures apart from the economic collapse.(1) For example, the ongoing recession in Brazil is an example of how economic collapse can trigger an increase in M&A deals. In Brazil, the recession has been judged to be the worst since the 1930s and has resulted in the sale of Brazilian assets, providing attractive deals for M&A bargain hunters.(2) According to PwC, the number of acquisitions by foreign investors in the country increased by 5%, accounting for more than half of all M&A transactions.(3)

A survey of 680 global M&A professionals indicates that 2016 will see robust M&A activity, just as 2015 did, due to greater technology, as technology makes communication and networking in M&A deal making easier and faster for parties around the world.(4)

Globally, since record keeping began in 1980, only six transactions have surpassed $100 billion – and two of these were announced in 2015. The year 2015 saw M&A increase at an unparalleled pace, resulting in industrial change and strategic transformation in the volume of M&A transactions. It has been predicted that these levels of M&A transactions will be replicated in 2016.(5) Despite the uncertainty surrounding Brexit, which led to a sharp decline in the value of sterling, it is still expected that this prediction about M&A transactions will hold true. The Mergermarket Q1 trend report shows China at the centre of global M&A in 2016, with deal values amounting to $81.7 billion.(6)

Local trends and predictions

In the Nigerian M&A context, 2015 saw a 22% decline in the number of deals and a 65% drop in the overall value of deals, from $9.2 billion in 2014 to $3.2 billion in 2015.(7) This decline was due to regulatory uncertainty, falling oil prices and the volatility of the naira, as well as uncertainty surrounding the 2015 general election, which increased investor caution.(8) Despite this declining trend, M&A deals were dominated by the following sectors:

  • energy, mining and utilities (28% of deals);
  • consumers (20%);
  • financial services (12%);
  • tech, media and telecommunications (12%);
  • business services (8%);
  • industrial and chemicals (8%);
  • construction (4%);
  • pharmaceuticals, medical and biotech (4%); and
  • transportation (4%).(9)

In 2015 the Nigerian Securities and Exchange Commission (SEC) recorded 12 M&A transactions.(10) Rules 421-499 of the SEC Rules 2013 regulate mergers, acquisitions and external restructurings for public and private companies. Companies are looking to strategic mergers and acquisitions to drive revenue synergies, product expansion and cost reductions in the face of dwindling oil prices, foreign exchange incursions and official economic recession. On August 31 2016 the National Bureau of Statistics of Nigeria released official gross domestic product figures for the second quarter of 2016, confirming that the Nigerian economy was officially in recession (defined by two or more consecutive quarters of negative economic growth).(11) Just as in Brazil, the Nigerian recession has resulted in calls for the sale of government stakes in strategic assets such as the Nigeria Liquefied Natural Gas Company, the African Finance Corporation and joint venture companies, and the privatisation or concession of major regional airports and refineries to boost the ailing economy, which will invariably lead to increased M&A activities. Some parties have argued that the sale of national assets in a transparent manner will help to raise capital, improve Nigeria's foreign reserves, calm investors, stabilise the economy, add value and act as a way of bouncing out of the current recession. However, those who oppose such sale argue that selling promising assets will be counterproductive.(12) Rather, they call for the sale of non-performing assets, which require huge sums of money for their maintenance (eg, some of the aircraft in the presidential fleet).(13) Opponents further argue that due to a previous lack of accountability for sovereign assets divestiture, the proceeds from a sale of national assets may end up largely unaccounted for. Over the past decade Nigeria has privatised assets under the supervision of the Bureau of Public Enterprises (eg, the privatisation of the electricity sector) and the proceeds have not benefitted the Nigerian people.(14) It has also been suggested that if looted funds can be recouped, there will be no need to sell national assets.

As the debate over whether to sell the assets continues, it is uncertain what the outcome will be. However, if it results in divestment by the government, it should drive more local M&A transactions in 2016 and beyond.

Energy and mining sector
The year 2015 was robust for M&A transactions in the oil and gas industry because, following the fall in crude oil prices caused by the economic downturn, smaller companies became vulnerable to being cherrypicked and taken over by larger companies for commercial advantage and market dominance. In addition, the devaluation of the naira resulted in most M&A deals being domestic, as the Nigerian economy could not compete favourably in outbound deals, resulting in the divestment of onshore oil and gas assets by international oil companies to Nigerian oil and gas companies. For instance, a number of international oil companies, including Shell and Chevron, sold some of their assets to domestic players such as Seplat Consortium (comprising Seplat, Amni International Petroleum Development Company Limited and Delta State-owned Belema Oil), First Exploration and Petroleum Development Company, Lekoil and Seven Energy for $259.4 million (around N44.09 billion).(15) Further, Seven Energy Limited – a wholly owned subsidiary of Seven Energy International Limited, an integrated oil and gas development, production and gas distribution company with interests in Nigeria – completed the acquisition of the entire issued share capital of East Horizon Gas Company Limited, the gas subsidiary business of Oando Plc, Nigeria's leading indigenous oil and gas operator, for $250 million, to boost Oando's liquidity.(16)

Although the sector was hitherto predominantly operated by foreigners, the attractiveness of the Nigerian oil and gas industry and favourable government policies such as the enactment of the Nigerian Oil and Gas Industry Content Development Act 2010 have encouraged local participation in exploration and production activities, thereby developing local technical and operational capacity in the oil and gas sector.

Outlook for 2016/17
According to the Mergermarket report, Nigeria's rich natural resources will lead the energy, mining and utilities sectors to deliver more deals amid the downturn in oil prices in 2016.(17)

It is anticipated that the M&A trend in this sector will witness more divestments by international oil companies to local companies, considering the changing political landscape in Nigeria and the fact that recent oil price forecasts do not look positive. It is more likely for oil companies to merge, thereby forming stronger alliances in the sector, and for smaller companies to be taken over by larger oil companies in order to reduce costs and capital expenditure, as well as operating sustainably, due to a fall in global commodity prices.

It is increasingly pertinent for the government to address worrying sector issues, such as dealing with contentious provisions in the Petroleum Industry Bill in order to enable expeditious passage. The bill may result in more mergers between indigenous companies and foreign companies or the acquisition of shares by indigenous companies in foreign companies which already have joint ventures with the government due to the local content requirement,(18) which is a key provision in the bill.(19) This will not only provide incentives to encourage the indigenous oil industry, but also benefit Nigerians enormously in terms of employment.

Power sector
The privatisation of Nigeria's electricity sector in 2013 was described as one of the world's largest privatisations and a landmark achievement.(20) The aim of the privatisation was to reform the power sector and create capital-raising opportunities. This saw the unbundling of Power Holding Company of Nigeria and the emergence of six successor generation companies ('gencos'), 11 distribution companies ('discos') and one transmission company through a public open bid process. This also led to major acquisitions by foreign and local investors, including the acquisitions by various companies of 80% equity stake in each of the power generation companies built by the federal government of Nigeria under the National Integrated Power Project.(21) International oil companies have increased their efforts to venture into the Nigeria power sector, utilising gas, hydro and renewable energy such as solar and wind power to expand their business. This is because Nigerian gas reserves exceed oil reserves, and gas can be used by thermal power plants to generate electricity as well as enormous renewable energy potential in Nigeria, even though oil has been considered a key economic driver for more than 50 years.

Total Group acquired a controlling interest in SunPower, the maker of high-efficiency solar modules to develop solar energy solutions. Although this was not a Nigerian acquisition, the product of this acquisition gave rise to the use of solar energy by Total in Nigeria to introduce:

  • 'Awango' lamps to rural communities in 2013, which give 30 to 48 hours of light;
  • solar stations in 2014;
  • solar home systems to households with no access to grid-supplied electricity in 2015; and
  • solar hybrid solutions to Onigbagbo Station, Lagos and some telecoms and gas filling stations.(22)

This has hugely improved Nigerian electricity and reduced the complete reliance on traditional modes of generating power through gas and hydro plants. It was anticipated that the acquisition would trigger similar acquisitions by oil companies (local and foreign) that deal with renewable energy.

Outlook for 2016/17
Various factors, including the volatile nature of the naira and foreign exchange incursion (resulting in huge costs to purchase and maintain power plant parts) and the repayment and servicing of US dollar-denominated debt incurred for the acquisition of the assets, have resulted in illiquidity in the sector. This has been further aggravated by chronic shortfalls in the payments made to gencos by the government-owned bulk trader for power delivered to the sector.(23) This reduction in gencos' finances will create an environment for mergers between players in the sector or acquisitions by stronger companies of financially vulnerable companies. In essence, this has the potential to result in more M&A activities in the sector going forward. It is hoped that M&A activity between foreign and indigenous companies will be used as a tool to open up new fields of technology in the power sector which, despite undergoing reforms, has seen little change.

Banking sector
The banking industry has undergone much transformation via M&A activity. Some of the M&A transactions in the banking sector have been driven by regulatory measures which imposed stringent conditions on banks in order for them to retain their licences. As a result, several banks were forced into M&A transactions in order to meet the regulatory conditions set down by the Central Bank of Nigeria (CBN). On several occasions the CBN has found it necessary to issue such directives for the purpose of ensuring the investor and customer confidence needed to attract and retain deposits. In 2005 the number of banks in Nigeria was reduced from 89 to 25 to comply with the CBN's 2004 directive to all Nigerian banks to recapitalise from N2 billion to N25 billion. This reduction resulted from a number of mergers and acquisitions undertaken by banks in order to meet the recapitalisation requirement. However, some of the transactions were so complex that they have not yet been completed satisfactorily, leading to subsequent mergers and acqusitions in the banking sector. Examples of these include the 2014 merger between IBTC Chartered Bank Plc and Stanbic Bank of Nigeria Limited, and the 2014/15 Skye Bank acquisition of 100% shares in Mainstreet Bank from the Asset Management Corporation of Nigeria (AMCON). In addition, in 2015 Heritage Banking Company Limited acquired Enterprise Bank Limited after obtaining the requisite approvals from AMCON, the Federal High Court and the CBN. Another recent M&A transaction in the sector was the merger between United Mortgage Ltd and Spring Mortgage Plc.(24)

Outlook for 2016/17
With international prices declining, the foreign exchange market extremely volatile and increasingly stringent regulatory requirements within the banking industry, there is an increasing need for banks to restructure. This is likely to lead to an increase in M&A deals in 2016/17.

As well as carrying out M&A deals themselves, banks have a strong role to play in increasing M&A deals in other sectors which resort to banks to fund their M&A transactions via debt. Thus, the banks will increase their focus on the creditworthiness of borrowers and scrutinising the bankability of deals to ensure contractual protection and to mitigate the increased risks of financing non-viable deals. Risk management mechanisms should be improved to ensure that the banks adopt high-quality procedures for debt financing.

Further, the issues of corruption, fraud and insider abuse which damage investor and customer confidence in the banking sector need to be reduced or eradicated completely in order to promote good banking practices in Nigeria and ensure the adequacy of capital and liquidity.

Infrastructure sector
There is huge potential for M&A in this sector, considering the economic downturn and recession in Nigeria. These factors account for the government's willingness to reduce its spending and engage the private sector in public-private partnerships (PPPs) for the development of critical infrastructure. The Ministry of Budget and National Planning requires a total investment of approximately $3.05 trillion (approximately N485 trillion) for the delivery of quality infrastructure over the next 30 years across different asset classes to bridge the existing infrastructure deficit .(25) This PPP approach is likely to result in increased merger activity by private sector companies which wish to form stronger alliances in order to gain an advantage over competitors and to win bids within the public procurement process (a pre-condition for a PPP). Other companies may acquire shares in government-owned companies or government assets under concession grants, thereby increasing the number of acquisitions.

Outlook for 2016/17
This trend is likely to continue for as long as the economic downturn persists, particularly as there have been calls for the government to sell its assets in light of the recession. The result should be beneficial as the government can utilise the skills, expertise and efficiency associated with the private sector to transform non-performing assets. For example, the refineries will be rehabilitated to improve industrialisation, reduce Nigeria's reliance on importing refined products, create jobs and bring funds into the economy.

Consumer sector
According to the Mergermarket report, the consumer sector accounted for the second-highest number of M&A deals in 2015.(26) It further stated that another appealing aspect of the Nigerian deal market is that it has diversified beyond natural resources to establish an M&A market in the consumer sector, accounting for an increasing share of deal volume. Some of the M&A deals in the Nigerian consumer sector during 2015 included a takeover bid by Lafarge Africa Plc for 927,008,865 shares of Ashaka Cement Plc(27) and the acquisition of Flour Mills Nigeria Plc by Mount pine Limited, which was notified to the SEC.

Outlook for 2016/17
Afolabi Olorode, head of financial advisory and equity capital markets at FBNQuest, has commented that Nigeria's size, population and consumer trends make it an attractive market compared with other African countries, which should provide some resilience to the challenges posed by the decreased value of the naira, foreign exchange volatility, regulatory uncertainties(28) and dwindling oil prices. Thus, in the consumer sector the outlook for Nigerian M&A in 2016 and beyond is positive.


It is hoped that the federal government will aggressively enforce the drive for economic diversification to reduce drastically the existing reliance on oil and place more emphasis on industrialisation, agriculture and entrepreneurship in order to reinvigorate the economy. This process of diversification should boost the trend for M&A transactions in Nigeria during 2016 and beyond.

For further information on this topic please contact Kate Okoh at TRLPLAW by telephone (+234 9 413 1897) or email ([email protected]). The TRLPLAW website can be accessed at


(1) See

(2) See

(3) Ibid.

(4) See

(5) Supra note 2.

(6) See

(7) Deal Drivers Africa published by Mergermarket, p 36, available at

(8) See, accessed October 14 2016.

(9) Supra note 7.

(10) Business Combination (1983-2015), document developed by the SEC.

(11) See

(12) According to Nigerian Labour Congress President Ayuba Wabba, an asset such as Nigeria Liquefied Natural Gas (NLNG) Company, which yields over $1 billion to the nation every year, is a valuable asset which should be treasured and not sold.

(13) On October 4 2016 President Buhari ordered the sale of two presidential aircraft (a Falcon 7x executive jet and a Hawker 4000). See

(14) See

(15) See

(16) Supra, note 10.

(17) Supra note 7, p 37.

(18) In August 2016 the Nigerian House of Representatives Committee on Local Content threatened to cancel all oil and gas contracts already awarded to international oil companies which indigenous companies had no capacity to execute as the committee believed that the involvement of indigenous companies in the oil and gas industry would help to reduce capital flight and further promote local content. See

(19) Nigeria: The ABC of Petroleum Industry Bill, Nextier Advisory. See

(20) See

(21) See

(22) Total Solar Solution presentation delivered at the IFC/Department for International Development Workshop on Solar Market Development and Finance In Nigeria, Sheraton Hotel, Abuja, September 22 2016.

(23) Nigeria Electricity Bulk Trading Plc is a wholly owned federal government company with a trading licence meant to act as the revenue gap filler and offtaker in the electricity sector, and responsible in the transitional stage for purchasing bulk power from gencos through power purchase agreements and reselling to discos through vesting contracts until such time that discos can enter into direct purchase arrangements with gencos on market terms.

(24) Supra, note 10.

(25) See the-partnership-for-implementation-of-the-national-infrastructure-master-plan-niimp.

(26) Supra note 7, p 37.

(27) Supra, note 10.

(28) For example, the regulatory sanction imposed on MTN, the largest mobile operator in Africa, by the Nigeria Communications Commission for failing to cut off unregistered users – the fine of $5.2 billion was subsequently reduced.