Project-Accounting for Meregers and Acquisition of Business in Nigeria[1]Tope

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

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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

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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.

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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

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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.

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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

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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.

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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.

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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.

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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

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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

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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.

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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

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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

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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

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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

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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

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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.

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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

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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

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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:-

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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

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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.

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“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

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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.

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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

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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

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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

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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.

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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