CHAPTER ONE 1.0 INTRODUCTION Merger and acquisition as a business combination cannot be over emphasized.

Merger and acquisition can either increase or decrease the financial base of a firm. The most important thing is the management team choices of adopting a proper concept that will enhance better evaluation. Generally, before a company merges together that is the predator company and that of the target company they must be thoroughly appraised using realistic models and method of appraisal. This study attempts to highlights the survival and growth of Nigeria companies especially the oil industry with specific concern on mergers and acquisition scheme in Nigerian economy. Where two or more autonomous companies come together under a common control or where there is formation of a new company which acquires the assets (and possibly the liabilities) of two or more existing companies or on the other hand, where a company (holding company) is taking over the voting share of another company (subsidiary), a merger or acquisition has invariably occurred. The current predicament in Nigeria calls for pulling together of resources and it more efficient utilization for overall economic rationalization, survival and growth. However, one of the instruments to achieve survival and growth in business and companies that will
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have direct effect on the economy of the country is business combination which may take the form of merger, acquisition, absorption, consolidation etc. as regards the topic of this study, the meanings of merger and acquisition are hereby defined below:Generally, the word merger implies the combination or fusion or rather coming together of two or more formerly independent business units into one organization with a common ownership and management. Merger is a form of business combination where two companies join together with one being voluntarily dissolved without being wound up by having its interest, resources, shareholders, asset, and liabilities taken over by the other company. In recent usage, merger is a special case of combination where both merging companies join together on equal terms and at the same time bringing under the control of a single management, the management of two independently operated businesses. Merger is the combination of two or more business units, which pull or unite together their resources and interest with a view to achieving a continuing mutual sharing in the benefits and risks that may occur. Scientifically put, merger is the fusion of two or more enterprises in which no new concern (entity) is created. The word acquisition means taking over, therefore, acquisition business means take over or purchase of business. Acquisition arise
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when a company purchases the business and undertaking of another company where the acquired company retains its legal existence and continues its business but assumes the status of a subsidiary company to the acquiring company, which automatically becomes a holding company. Acquisition or take over business is the union of two or more formerly independent businesses or firms under a single ownership accomplished by the complete purchase of one companys stock by another. The acquired company then ceases to be a separate entity but a subsidiary of the acquiring company. An acquisition is a business combination that is not a union of interest but a purchase of interest. Acquisition is any business combination that is not a merger. In which case, the shareholders of the acquired party do not have a continuing interest in the combined entity but instead sell their shareholding for cash or other non equity consideration since they have no control over the business any longer, as long as the parties are not combining on equal terms. According to innocent okwuosa (2000) an acquisition is any business combination that is not a merger. 1.1 HISTORICAL BACKGROUND OF ELF OIL NIGERIA LIMITED Elf oil was incorporated as a private limited liability company on 20th November, 1981 to engage in the business of marketing petroleum products, lubricants and chemicals. The companys authorized share capital on incorporation was 1,000,000 divided into 2,000,000 ordinary shares of 50k each.
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Right from this time (November 1981) the authorized share capital off Elf Oil has been receiving increment. Up to June 2000 when the merger took effect the share capital and increased to N600,000,000 divided into 1,200,000,000 ordinary share of 50k each out of which 300,000,000 divided into 600,000,000 ordinary share of 50k each were issued and fully paid. 1.2 TOTAL NIGERIA PLC Total Nigeria Plc was incorporated as a private limited liability company on 1st June 1956 as total Oil Product (Nigeria) Limited to market petroleum products throughout Nigeria. In 1978, the company became a public limited liability company and was granted a listing on the Nigeria stock exchange in April 1979, after 40% of its equity capital was sold to the Nigerian Public in compliance with the provision of the now repealed Nigerian Enterprises Promotion Decree 1977( the NEP Decree 1977), the companys authorized share capital on incorporation was N1,000,000 divided into 50,000 ordinary share of N20 each. Right from 1956, the authorized capital of Total Plc has subsequently received changes. From 1956 to June 1978, the authorized capital of N1, 00.00 divided into 50,000 share of N20 each increased to N22, 500,000, capital divided into 1,125,000 shares. From October 1978 as the shares kept on increasing, the per value was denominate to 50k per share. Up to the year 2000, the authorized share capital to Total

had increase to N112, 000,000 divided into 224,000,000 ordinary shares of 50k each. 1.3 OBJECTIVES/PURPOSE OF THE STUDY The study intends to examine the role of mergers and acquisition in the survival and growth of Nigeria companies.

To investigate into business in which merger and acquisition can be of greatest use in Nigeria. To find ways of making mergers and acquisition attractive to Nigeria companies To show the benefits of mergers and acquisition to Nigerian economic development. To explore into the reason why Nigerian indigenous company are not involved in mergers and acquisition and other related business combinations. 1.4 SIGNIFICANCE OF STUDY The study intends to provide a means of survival, growth for present and future companies in Nigeria through the creation of awareness of the research topic. The knowledge of mergers and acquisition in business community as a way out of financial distress will enhance the nations economic development in terms of economic down turn and recommendations made will be of immense importance to the companies of study. The study will serve as a reference to student in the accounting department of Delta state university, Abraka and other students
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carrying out further research on the topic and other related disciplines. The study will add to the existing literatures on mergers and acquisitions. 1.5 SCOPE AND LIMITATION OF STUDY The research extensively covers the historical background of the companys study, Total Elf, the state of the new company after acquisition, the research instrument used i.e. primary source, personal interview and secondary source, published information and financial publications. More over, the research covers the determination of the related business combination similar to mergers and acquisition e.g. absorption, consolidation etc. the limitations of the study include the following;- the cost of transportation to Total headquarters in Victoria Island, typing and photocopying have restricted the scope of the study areas of research work which could adequately be covered. The difficulties in getting many interviewers to clarify some points. 1.6 DEFINITION OF TERMS The key term or word use in this study is hereby defined:Holding Company: A holding company is a company that has another company that it controls. Subsidiary Company: A company is a subsidiary if it is controlled by a holding company.

Authorized Share Capital: The capital stated in the memorandum of association with which the company wishes to commence the business. Ordinary Shares: The shares of the owners of the company, on which dividends are paid according to profit left after payment of dividend on preference shares which attract fixed dividend. Issued Shares: There are part of the authorized shares issued out to the public for subscription. Fully Paid: This represents the issued shares that have been fully paid for by the public; that is, the nominal value on the shares has been fully received by the company. Par Value: this is the value at which a share is to be sold to the public. It is otherwise means nominal value. 1.7 SUMMARY/OUTLINE OF STUDY In summary, business combinations Is a means expansion, Growth and acquisition are strategies of maintaining expansion, Growth and profitability level in companies business. Merger acquisition and other business combinations terms like consolidation. Absorption, take over, pulling of interest, amalgamation etc, are used to describe the business transaction between one firm and other. However, they all identify technical meaning and are used interchangeably.
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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.

REFERENCES Ican Study Text (1988) pg 101 -200 PE II Financial Management, Lagos May Associates Innocent Okwuosa (2000): Group Accounts. Safe Publication Ltd, Lagos. Kam, Veron (1990): Accounting Theory 2nd Edition (New York, John Wileg and Sons Inc.) Mathur I. (1979): Financial Management, Macmillan Publication Company Incorporation New York Okwuosa I. (2000): Group Account Published by Arnold Consulting Ltd, Martins Street, Lagos. Pandey I.N (1990): Financial Management (New Delhi, Vikas Publishing) Jennings A.R (1990): Financial Accounting Manual, 2nd and 3rd Edition Low Priced Book Scheme (ELBS) Published. TOTAL FINA ELF, TOTAL /ELF 2001 scheme of merger 2001.

CHAPTER TWO 2.0 2.1 LITERATURE REVIEW INTRODUCTION Mergers and acquisition are very common in the developed countries like Britain and Unites State of America but are to be very prominent in the scheme of events in Nigeria. However, it is now coming to the awareness of Nigerias that, to achieve the objectives of probability and growth among the key objectives of business concern, the strategies of Merger, acquisition, consolidation, takeover, business, absorption etc. must be developed and the effect of our cultural background in terms of theory of assets ownership (who owns assets and takes control) must be eradicated in order to consummate the strategy of merger and acquisition. In actual fact, growth has been a way of life for business units virtually from the day business activities began in early times. Growth can be accomplished either within the business unit or through combination with accomplished companies either within business unit or through combination with other business units, organizations, merger, acquisition, absorption, take over, consolidation, amalgamation. 2.2 CONCEPT OF BUSINESS COMBINATION MERGER According to the companies Allied Matter Decree of 1990 (CAMD 1990) section 591, merger is any amalgamation of the undertaking or

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any part of the undertaken or interest of two or more companies or the undertaken of one or more bodies corporate. Pandey I.M (2000) defines mergers as the combination of two or more companies unto one company International Accounting Standard No. 22 (IAS 22) defines merger as the uniting or pooling of interest of two or more business An acquisition is defined by international accounting standard No 22 as a Business combination that is not a uniting of interest Aamiakor in his paper mergers and acquisition defined acquisitions as including all business and corporate organizational and operational devices and arrangement by which the ownership and managements of independently operated properties and business are brought under the control of a single management. Examples of acquisition of businesses are John Holt Plc acquire Haco Ltd 1963, Lever Brothers Nigeria Plc and Lipton of Nigeria in Lever Brothers Nigeria and Cheesebrough Product in 1988. ABSORPTION Absorption is a combination of two separate business entities in which the business of one is transferred to another and the transferor (the acquired company) voluntarily winds up or dissolves. An example of business combination which can be described as absorption is the combination of the companies of case of study. Total and Elf oil as trading Total Plc takes over the assets and liabilities and operation of
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Elf Oil Nigeria limited and Elf Leases trading and UBA acquired STB 2005.

CONSOLIDATION A consolidation is a form of merger according to Pandy I.M (2000) is a combination where all companies are legally dissolved and a new entity is formed. A consolidation as a form of business and economics, a consolidation is the union of two or more formerly business or firms into a third or new firm under a single ownership. Consolidation is most suitable to size business, operating on a relatively small scale. AMALGAMATION Amalgamation is a business combination that involves small scale business, where a holding company is usually established to acquire all or a majority holding of the voting shares of the other business which continue in existence as the subsidiaries of the holding company.

2.3

CLASSIFICATION OF BUSINESS COMBINATIONS

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Various classification of business combinations have been made by different authors but this write up will focus on two major classifications which are: Classification based on economic effect Classification based on legal status.

CLASSIFICATION BASED ON ECONOMIC EFFECT The extend to which a combination may produce economic gains or effect depends on whether the business ventures of combining partners are related or not. Therefore, the management of the acquiring company should clearly define their organizational strategy whether it is vertical, horizontal or conglomerate. HORIZONTAL COMBINATION This is a combination to two or more firms in the same business, in a similar type of production and in the same manufacturing or distribution level. For example, the 1985 merger of Nestle and carnation where both companies manufacture food product. VERTICAL COMBINATION This is a combination of two or more firms in different stages of production and distribution level. It is a line combination which can take the form of a forward or backward integration.

FORWARD INTERGRATION
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Occurs if a company combines with its customer to move up towards the ultimate market. BACKWARD INTERGRATION This occurs if a company combines with its supplier of materials that will provide its basic impact. CONGLOMERATE COMBINATION Conglomerate combinations takes place between two or more firms whose businesses are not directly related or whose products have little or no resemblance to one another. This is done to reduce risk as the business resources would be diversified. For instance, if a company, the manufacturer of babies cloths combines with another company of manufacturing textiles. CLASSFICATION BASED ON LEGAL STATUS/FORM The main categories to be discussed here are statutory mergers, statutory consolidation, and sales of assets and lease of assets. STATUTORY MERGER Under statutory merger the merger company that is taken over by another company ceases to exist as a separate entity. The combination id based on a tax free exchange of shares where all the assets and liabilities of the acquired company are assumed by the surviving company.

STATUTORY CONSOLIDATIONS
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Under statutory consolidation, both firms merger into a new in and both cease to exist as separate entity. Shares of both companies are exchanged for sales of the new companies where the new company assumes all the asserts and liabilities of both companies. SALES OF ASSETS Under the sales of assets are company that sells all its assets to another where in addition, the buying company may also agreed to assume some or all of the vendor companys liabilities which the purchase payment may be in cash, securities or combination. LEASE OF ASSETS Lease of assets have to do with renting out an asset like plant, machinery equipment etc, for a long period of time, we can lease it out to another asset (lessor) discontinues its operation; we can lease it out to another company and thereby derive income from the rent, which accrues under the lease. This situation is usually brought about by persistent losses in the lessor company either through this management or often in Nigeria context, through lack of raw materials. 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:15

2.4

GROWTH Expansion is a major object or business organization. In corporate annual report, top management often lists growth among its primary goals. Some companies believe that merging or booing an on going concerns aids growth than breaking into or establishing a new market which in reality helped the growth of some Nigerian companies e.g. Lever Brothers Nigeria Plc , John Holt, Ltd. FINANCING The survival and progress of any business are determined by finance. Firms with excellent growth potential may find it difficult to achieve this potential as a result of lack of access to financing. In a situation like this, it is reasonable for such firm to merger with cash rich or highly liquid firm. ECNOMICS OF SCALE IN OPERATION Mergers and acquisitions may result in economics of scale in operation in terms of saving human and material resources that is, cost reduction in the area of ware housing, depot charges, site utilization, personnel, planning and shipping. Moreover, allocations of fixed cost over a large volume of sales and thereby obtain savings on production cost by eliminating duplicative five costs leads to merger and acquisition.

DIVERSIFICATION

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A company may merge with another company it is wished to diversify in production, risks maturity and space which may be for securing reasons. AVIODANCE OF EXPENSES OF GOING PUBLIC A privately owned company may combine with publicity owned company to avoid the expenses of going public i.e. listing requirements for its quotation in the stock exchange market and also avoid the risk of under subscription. COMPETITION Elimination of competition sometime might be a concrete reason for business merging or acquiring one another. SYNERGY Merger and acquisition in most cases, produces synergetic effect in companies. In financial context, synergizing means that the combined firms is doing better or are having improved profit than when they where operating as separate entities. TAKEOVER Pandy I.M (2000) defined take over as obtaining control over management of a company by another. It is like acquisition but under the monopolies and restrictive trade practice Act, take over means acquisitions of not less that 25% of the voting power in a company.

2.5

PROBLEMS ASSOCIATED WITH MERGERS AND ACQUISITIONS 17

It should be apparent that the joining with or purchase of another fir is merely a complex investment project. As such, it must satisfy the same criteria and be justified on the same ground as any other investment opened to a firm. The problems associated with mergers and acquisitions are hereby discussed below:Government, shareholders, labour union and individual workers alike may disapprove of a merger/acquisition because of fear if it leading to creation of monopolistic powers, retrendement or being against public interest. In order to evolve a strong and virile economic and financial system in which its citizens would participate, government therefore strive to eliminate imperfections and abuses that may be detrimental to the orderly development of the political, economic and financial system. Perhaps the most difficult job in mergers/acquisitions is the handling of people. The fact must be recognized objectively that people/groups who are likely to be affected my mergers, their feeling and views deserve understanding and mutual respect. Also, due to the limited business vision and traditional confrontations between staff and management, the job of notifying, briefing, education the non management staff to secure their support is usually more difficult.

FINANCIAL DIFFICULTIES This poses a lot of concern to the firm. The cost and the future inflow, in ascertain cost, it is necessary to establish the alternative
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value to its owners of the firm under considerations for purchase. That is the value from continued operation or selling out to third party and this calls for a rather different techniques that the applicable to normal internal investment projects. EXISTENCE OF GOODWILL The assets of going concern usually include goodwill i.e. the reputation a business enjoys with its customers which gives the business value above its physical assets value. Since goodwill is an intangible assets, its valuation usually poses problem in situation of merger/acquisitions. PERSONAL PROBLEMS Management and labour are often a critical a factor affecting the profitability of the new company which variants through investigation in view of their financial implications, firstly, the level of wages and salaries in the firm will need to be compared to those rival and neighboring firms as a re requisite to assessing long term labour costs. Other major financial problems are the setting of outstanding obligations, the right of existing shareholders, minorities, etc, when a firm is purchased which has redeemable preference shares, debentures secured or insecure loans, banks overdraft etc. there is often the opportunity and sometimes the obligation to redeem such finance at the time of purchase. These complications do not exist in the case of internal investments. LEGAL FRAMEWORK Merger arrangement is an exhilarating game and like all business games, it is not a fun game. It has its players and special rules and
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there are both winners and losers. As in all games the rules change with time and need. Most regulatory procedures for mergers and acquisition are aimed at the antirust implication of such merger arrangements. In other words, preventing the incidence of such mergers becoming monopoly. Thus, it would be rational to reject any proposal for the scheme if it is likely to result in monopoly or to operate against public interest. Unlike USA and the United Kingdom, there are no formal regulations on mergers acquisitions in Nigeria. The companies and Allied Matters Decree 1990 merely stipulate the procedures and approval for reconstruction and merger, these are highlighted below. 2.6 PROCEDURES AND APPROVAL FOR RECONSTRUCTION AND MERGER Where under a scheme proposed for a compromise arrangement or reconstruction between five or more companies, the whole or any part of the undertaking of the property of any company concerned in the scheme (the transfer company) is to be transferred to another company, the court may on the application of any of the companies to be affected, order, separate meeting of the companies to be summoned in manners as the court may direct. If a majority representing not less than three quarter in value of the shares of members, being present and voting either in person or by proxy at each of the separate meetings, agree to the scheme, the scheme shall be referred to as the Securities and Exchange Commission for approval.

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If the scheme is approved, an implication may be made to the court of one or more of the companies and the court shall sanction the scheme, and when so sanctioned, the same shall become binding on the companies and the court may by order sanctioning the scheme or by any subsequent order make provision for all or any of the following matters:The transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company. The allotting or appropriation by the transferee company of any shares, debentures, policies or other like interest in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person. The continuation by or against the transferee company of any legal proceedings pending by or against any transferee company. The dissolution, without winding up of any transferor company. The provisions to be made for any persons who within such manner as the court may direct, dissent from the compromise or arrangement. Such incidental, consequential and supplemental maters are

necessary to secure that the reconstructions or merger shall be fully and effectively carried out. An order under paragraph (IV) of subsection C of this secures that the reconstruction or merger shall not be made unless:21

The whole of the undertaking and the property assets and liabilities of the transferor company are being transferred into the transferee company, and of the court is satisfied that adequate provision by way of compensation or otherwise have been made with respect to the employees of the company to be dissolved. Where an order under this section provides for the transfer of property or liabilities, that property shall be virtue of the order, be transferred to and become the liabilities of the transferee company, and in the case of any property, if the order so directs, freed from any charge which is by virtue of the compromise or arrangement to cease to have effect. Where an order is made under this section, every company in relation to which the order is made shall cause an office copy there of to be delivered to the commission for registration within 7 days after the making of the order and a notice of the order shall be published in the gazette and in at. least one national newspaper and if default is made in complying with the provisions of this subsection, the company and every officer of the company who is in default shall be guilty of an offence and liable to a fine of N100.

In this section:Property includes property rights and powers of every description. Liabilities includes duties of every description notwithstanding that such right, power and duties are of a personal character which could not generally be designed or performed vivaciously.
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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 aggregate of their value and that of the share whose transfer is involved, the foregoing provisions of this sub section shall not apply unless:23

The transferee company offers the same terms to all holders of the shares whose transfer is involved, or where those shares includes shares of different classes, of each of them and; the holders who approved the scheme or contracts besides holdings not less than nine tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, shall not be less than three quarters in number of the holders of these shares.

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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 3.1 RESEARCH METHODOLOGY 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
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will be used extensively to obtain broader ranger of information from various categories of staff within the organization of TOTAL ELF NIG PLC. Will be employed as the case study. 3.3 DATA COLLECTION METHOD The data for this study will be collected through primary and secondary sources to carry out this study to its logical conclusion. PRIMARY DATA This describes data obtained through primary sources such as survey methods (questionnaire) et cetera. In this research study, the primary sources to be employed include the use of well structured questionnaires, and the conduct of personal interviews with the staff of TOTAL ELF NIG. PLC. SECONDARY DATA This includes, data sourced through journals, textbooks, prepared articles etc put differently, it describes data sources through not originally prepared for that study. The data in the study were sourced through journals written articles and textbooks on the topic. 3.4 RESEARCH INSTRUMENT The research instruments used were the questionnaire and the interview method. QUESTIONNIARE This questionnaire method describes a source or primary data in which series well structure question are prepared and administered to
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a defined study population. These questions are characterized by preciseness and are designed in simple and straightforward form. This is designed in order to test various hypothesis formulated and to obtain more information regarding the subject matter. The questionnaire consists of two main sections (A & B). The section A contains questions relating to the respondents biological data while section B contains questions relating to the topic of the study. The objective of this is to see how the respondents personal qualities affect its answer.. For this study, close ended questionnaire method will be employed. This is used as a supplement to the questionnaire, it is another method of investigation furthermore, it can be used to obtain answer that were impossible to be structured in the questionnaire. It also gives opportunity for the people who cannot fill questionnaires to express their views or and add their views or add their own quota through their verbal expressions. 3.5 SAMPLING PROCEDURE The sample: this describes the total number of element, which is under discussion and from whom information are desired. The population size was made up of the staff of TOTAL ELF NIG. PLC the sample size chosen was 40 staffs. 3.6 VALIDITY OF DATA Percinger N. (1973) validity is the degree to which a measuring instrument measures what is designed to measure. Every measuring instrument is designed for a specific measurement. It is correctly
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design. It measures what it is supposed to measure. If its design process is affected by error, the measurement will not be correct. The validity research instrument gives credibility to the research instrument. 3.7 METHOD OF ANALYSZING DATA In analyzing the data of the study, the chi square statistical technique will be employed or applied. The chi square statistical technique in testing the research hypothesis by comparing the on served frequencies and the expected frequency and then drawing a conclusion in view of the decision rule formulated initially. Chi square test statistical is given below X2 (O-E)2 E When E = summation E = expected frequency O= Observed frequency Decision criterion for the validation of hypothesis The value of chi square is computed from the above formula and the appropriate null Hypothesis is started. The decision rule is that if the computer value of chi square is greater than that table value at the appropriate level of significance (5%) and degree of freedom, we reject the null hypothesis (Ho) and accepted the alternative hypothesis (Ho) and accept the alternative hypothesis.
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The number of degree of freedom depends on the number of constraints imposed on the data for a contingency table. The degree of freedom is calculated on by using the formula.

Where

df = (r-I) (c-I) r= the number of rows c= the number of columns df= degree of freedom

3.8

LIMITATION OF METHODOLOGY Despite the effort put into this research, some problems surfaces and the gathering of data from this chapter. The problems include:

Some of the respondents failed to return the questionnaire at the appropriate time. Some respondents didnt return the questionnaire at all. The inability to conduct interview with some of the top management staff of the organization. Financial constraints in carrying out the research work. Time limitation

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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.

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CHAPTER FOUR

4.0 4.1

DATA ANALYSIS, PRESENTATION AND INTERPRETATION INTRODUCTION This chapter attempts to highlight the data collected, through the use of primary and secondary data in analyzing the validity and reliability of the data. A questionnaire method was adopted in collecting the respondents response. Fifty five (55) questions were distributed but (40) forty questions were returned.

4.2

ANALYSIS OF RESPONDENTS Data presented and analyzed in the study were elicited from the randomly selected respondents is indicated in the methodology. In this section, an attempt was made to analyze respondents responses to the questions structure forming the backbone of these research findings. To interpret and analyze the data, the use of number and percentage is adopted as (40) forty and 10% respectively represents below is the analysis of the respondents profile.

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Table 4.1: Sex of Respondents Sex Male Female Total Number of respondents 30 10 40 Percentage (%) 75 25 100

Table 4.1 shows that 75% of the respondents are male, while 25% of the respondents are female. Table 4.2 Department Number of respondents finance 5 technical personnel accounts audits Total 2 3 10 20 40 Percentage (%) 12.5 5 7.5 25 50 100

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%.

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Table 4.3: Status of Respondents Status Senior executive Management staff Junior staff Total Number of respondents 10 20 10 40 Percentage (%) 25 50 25 100

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 25-34 years 35-44 years 45 years and above Total Number of respondents Percentage 10 25 5 40 (%) 25 62.5 12.5 100

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.

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Table 4.5: Qualifications of Respondents Qualification SSCE/GCE O level OND/NCE/ATT HND/BSC ACCA, ACA, ACIB MBA, MA, MSC, MPA Total Number of respondents 5 20 10 5 40 Percentage (%) 12.5 50 25 12.5 100

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 1-5 6-10 11-15 16 years & above Total Number of respondents 2 8 25 5 40 Percentage (%) 5 20 62.5 12.5 100

The table 4.6 above shows clearly that 11-15 years of length of service constitute the 25 (62.5%) of the population, 6-10 years is 8(20%), 16 years and above and above is 5 (12.5%) and 1-5 years is 2(5%) of the total population sampled.

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Table 4.7: Do You Understand What Merger and Acquisition Means? Options Yes No Total Number of respondents 20 20 40 Percentage (%) 50 50 100

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 Yes No Total Number of respondents 20 20 40 Percentage (%) 50 50 100

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?

Options Yes

Number of respondents 35
36

Percentage (%) 87.5

No Total

5 40

12.5 100

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 Yes No Total Number of respondents 20 20 40 Percentage (%) 50 50 100

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 Yes No Total Number of respondents 20 20 40 Percentage (%) 50 50 100

From table 4.11 states clearly that 50% of the respondents agrees and 50% of the respondents disagrees to the option that merger and acquisition does not enhance growth and efficiency of the business operation.
37

Table 4.12: Does Merger and Acquisition Enhance Growth and Ensure Efficient Business Operation? Options Yes No Total Number of respondents 30 10 40 Percentage (%) 75 25 100

Table 4.12 reveals that 75% of the respondents are of positive support that merger and acquisition enhances growth and ensures efficient business operations, while 25% of the respondents disagree. 4.4 ANALYSIS AND TEST OF HYPOTHESIS The general purpose of hypothesis or significance testing is to examine the degree of validity and reliability of hypothesis and the degree of freedom. The chi square test is given as: The chi square test is given as: X2 = (0-E)2 E Where = Summation O= observed frequency E = Expected frequency The statistical test at 5% level of significance that: Answers given by the respondents are denoted by the term observed frequencies (0) while the theoretical frequency is denoted by term expected frequency (E). Expected frequency = (Row total x Column Total) Grand total
38

HYPOTHESIS TESTING Ho: Merger and Acquisition does not enhance growth and efficiency of Business operation Hi: Merger and Acquisition enhance growth and efficiency of business operation DECISION RULE If the chi square calculated values exceeds the Null Hypothesis (Ho) and then accept the Alternative Hypothesis (Hi). HYPOTHESIS I Options Yes No Total 7 30 10 40 8 20 20 40 Questions 9 35 5 40 10 20 20 40 Total 105 55 160

The derivation of expected frequency is as follows:Expected frequency = (Row total x Column Total) Grand Total F (1.1) F (1.2) F (1.3) F (1.4) = = = = (105 x 40) (105 x 40) (105 x 40) (105 x 40)
39

160 160 160

= = =

26.3 26.3 26.3 26.3

160 =

F (2.1) F (2.2) F (2.3) F (2.4)

= = = =

(55 x 40) (55 x 40) (55 x 40) (55 x 40)

160 160 160 160

= = = =

13.8 13.8 13.8 13.8

SUMMATION OF THE CHI SQUARE CALCULATED VALUE Cells Observed frequenc y F (1,1) F (1,2) F (1,3) F (1,4) F (2,1) F (2,2) F (2,3) F (2,4) 30 20 35 20 10 20 5 20 X
2

Expected frequency 26.3 26.3 26.3 26.3 13.8 13.8 13.8

0-E

(O-E) 2

(OE) 2 /E

3.7 -6.3 8.7 -6.3 -3.8 6.2 -8.8

13.69 39.69 75.69 39.69 14.44 38.44 77.44 38.44

0.52 1.51 2.88 1.51 1.05 2.79 5.61 2.79 18.66

13.8 6.2 CALCULATED

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

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COMMENTS Since the chi square calculated value of 13.939, we reject the null hypothesis and then accept the alternative hypothesis, which states that merger and acquisition, is effective and effective strategy for failing business organization. 4.5 SUMMARY OF HYPOTHESIS FINDINGS HYPOTHESIS 1 Ho: merger and acquisition does not enhance growth and efficiency of business organization Hi: Merger and Acquisition enhance growth and efficiency of business operation. OBSERVATION AND DECISION It was observed that the chi square calculated value 18.66 exceeds the chi square tabulated value 18.66 exceeds the chi square tabulated value of 7.81, we reject the null hypothesis and accept the alternative hypothesis which states that: Merger and Acquisition is an effective and efficient survival strategy for failing business operation. REFERENCES Adam S.O (1991): Statistical Beginners, Evans Brothers Ltd., Ibadan. Aborishade F. (1977): Research Method, A Student Handbook Multiform Ltd, Lagos. Hamburg M. (1977): Basic Statistic Modern Approach, 2nd Edition Harcourt Brace International, New York.
41

Lury D.A (1984): Data Collection in the Development Countries, Great Britain, Oxford University Press Ltd, London. Nnamdi A. (1996): Research Methodology in the Behavioral Sciences, Longman Nig Plc. Lagos.

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CHAPTER FIVE

5.0 5.1

SUMMARY, CONCLUSION AND RECOMMENDATION SUMMARY Clearly, mergers and acquisition as form of business combination are common occurrence in time of born as well as depression. The combinations have involved companies of various sizes and lines of business. Very often, huge sums of money have also been involved. In Nigeria, which perhaps has the highest frequency of business combinations, diverse literature has been written to cover at least the importance fact of merger and acquisition. A merger has been defined by the companies Allied Matters Act of (1990) as any amalgamation of two undertakings or interests of two or more companies or the undertakings of one or more companies and one or more corporate bodies. Merger therefore simply describes the combination of two or more separate companies to form a single company. Acquisition and or take over on the other hand, describes the process of acquiring by one company of sufficient shares in other company to give the acquiring company control over that of the other through the purchase of the assets (rather than shares) of the other company.

43

From the test of hypothesis conducted in chapter four using total Elf as a case study, the followings is the summary of its findings. Hypothesis X2 calculated X2 tabulated 1 1,1 18.66 18.66 7.81 7.81 Degree freedom 3 3 of Level significant 0.05 0.05 of

HYPOTHESIS 1 Ho: Merger and acquisition does not enhance growth and efficiency of business operation. DECISION Since the calculated chi square of 18.66 exceeds the table value of 7.81, we reject the Null Hypothesis (Ho) and then accept the alternative Hypothesis (Hi) which state that: Merger and Acquisition enhances growth and efficiency of business Operations HYPOTHESIS II Ho: Merger and Acquisition is not effective and efficient survival strategy for failing business organizations. DECISION Since the calculated chi square of 13.939 exceeds the table value of 7.81, we reject the Null Hypothesis (Ho) and then accept the alternative Hypothesis (Hi) which state that: Merger and Acquisition is
44

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. CONCLUSION DRAWN FROM THE FINDINGS For mergers and acquisition to be fully accepted or undertaken by Nigeria companies, awareness must be created through organization of workshops, seminars, symposium by reputable and corporate body to enlighten Nigerians entrepreneurs/businessmen. It would not be over emphasized to deduce that much stands to be benefited by the economy through mergers and acquisitions. This is in terms of synergistic effects, pooling of relative resources, ability to secure more credit facilities from financial institutions, which further increase production capacity and subsequently, qualitative and quantitative goods and services, cut in administration and overhead cost and the diversification advantages goes beyond long way to improve the economy. The scheme favours businesses that are capital intensive in nature such as manufacturing concerns, transport and communications, agricultural sector, oil and mining sector etc.
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5.2

The idea of the science being foreign is gradually disappearing as many Nigeria companies have taken to the administration of the scheme. This is borne out of the realization of the benefits to be gained and the fact that most companies who had undergone it have been successful. For example, Lever Brothers Nig Plc merged with Lipton Ltd. And Cheese borough Products Ltd, Nigeria Breweries Plc acquiring Schweppes from Nigeria Bottling Company Plc, Smitkline Beecham plc acquiring sterling products plc and total Nigeria Plc, merged with Elf Nigeria Plc. (the case study). 5.3 RECOMMENDATIONS BASED ON CONCLUSION DRAWN In view of the findings of the research study, the following is hereby recommended that: Merger and Acquisition should be encouraged particularly at a time like this. Due, to economic downturn many companies are finding it difficult to survive on their own. Tax holidays and other relative incentives should stand one of the benefits to be enjoyed by companies already or intending to undertake the scheme to encourage more companies on the verge of collapsing. Awareness created to enlighten the Nigeria Business Community should not be restricted to only top executives but also disseminated to the employees at various levels. Statutory regulations should be introduced to limit the tendency of mergers and acquisition becoming in the short run monopolistic practices.
46

The Nigerian Accounting Standard Board (NASB) scope of legislations is broadened to incorporate the accounting standards for mergers and acquisitions formation. For other sectors like the Banking industries which has been lately besieged with distress, suggestions have gone to the four big banks to acquire the distressed banks and some have been advised to merge together to save the industry from loosing the confidence bestowed on them by the public. Suggestions have gone to big banks to acquire the distressed bank and most banks have been merged together. 5.4 SUGGESTION FOR FURTHER STUDIES/INVESTIGATIONS In an attempt to validate or dispel the upsurge in adverse opinion on mergers and acquisition as a survival strategy for failing businesses, certain areas were revealed which were beyond the scope of the study. Thus, I suggest further studies or investigations in the following areas. Mergers and acquisition: Accounting implication a case study of Smithkline Beecham Plc. Mergers and Acquisition: A survival strategy for failing business. Mergers and Acquisition: A tool for revamping the Nigeria economy.

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BIBLIOGRAPHY Aborishade F. (1997):Research Method, A Student Handbook, Multi Form, Ltd, Lagos. ACCA (1987): Advanced Accounting Practice, Financial Accounting (London: BPP) Adam S.O. (1999): Statistics for Beginners, Evans Brothers Ltd, Ibadan. Alvemeche K.O (1996): Accounting for Mergers and Acquisitions of Business in Nigeria. Ammer C. (1977): Dictionary of Business and Economic Published by New York Free Press. Camp (1990): companies and Allied Matters Decrees. Published by Federal republic of Nigeria. GEE, PAUL (1988): Book Keeping and Accounting. 20th Edition (Kent: ELBS/Butter Worth). Hamburg (1977): Basis Statistics Modern Approach, 2nd edition, Harcourt Brace International, New York. IAS (2002): International accounting standard, paragraph 3, No22

48

ICAN study text (1988): PE II Financial Management (Lagos Associates) Innocent Okwuosa (2000): Group Accounts. Safe Publication Ltd. Lagos. Jennings A.R (1990): Financial accounting Manual, 2nd and 3rd Edition education, Low Price Books Scheme (ELBS) Publisher. Kam, Vernom (1990): Accounting Theory, 2nd Edition (New York: John Wiley and sons Inc.) Lury D. A (1984): Data Collection in the Development Countries, Great Britain, Oxford University Press Ltd. London. Mathur I. (1976): Financial Management. Macmillan Publication Company Incorporation, New York. Nnamdi A. (1996): Research Methodology in the Behavioral Sciences, Longman Nig. Plc, Lagos. Okwuosa I. (2000): Groups Account, published by Arnold Consulting Ltd. Martins Street, Lagos. Pandey I.M (1990): Financial Management (New Delhi: Vikas Publishing) TOTAL FINA ELF, TOTAL/ELF (2001) scheme of merger
49

Lagos State Polytechnic, Lagos School of Part time studies Department of Accountancy May, 2009 Dear Respondent LETTER OF INTRODUCTION I am a Higher National diploma final year student of the above mention institution carrying out a research project on the impact of Merger and acquisition of business in Nigeria. I am presenting this project in partial fulfillment for the award of Higher National Diploma in Accounting. All information with the questionnaire would be treated with utmost confidentiality. This questionnaire is purely designed for academic purposes and would be very grateful, if you can help in completing it. Thank for your co-operation Yours faithfully,

Aliu Muyideen

50

Please tick () for relevant answer where applicable. SEX DEPARTMENT male { } Female { { { { { { { { { { { } { { { { { } { { { { { {
51

1.

} } } } } } } } } }

2.

Finance Technical Personnel Accounts Audit

3.

AGE

15 25 Years 26 35 Years 36 45 years 40 Year and above

4.

Position held in the company Senior management staff Supervisory Junior management Clerical staff Other specify } } } } } } } } } } }

5.

Academic / Professional Qualification WASC / GCE O level or Equivalent OND, NCE & GCE A Level HND, B. sc , BA or Equivalent M. sc, MBA, MA or Equivalent Other specify please {

6.

How long have you been in the service? 1 5 years 6 10 years 11 15 years

16 - 20 years 21 25 years 26 years and above Length of service 1 - 5 Years 6 10 years 11 15 years 16 20 years 21 years and above 8. 9. Marital status: Married { Yes No
10.

{ { {

} } }

7.

{ { { { { } Divorce {

} } } } } }

Single { { { } }

Do you understanding what Merger and Acquisition means?

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. Acquisition? Yes No { { } }
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{ {

} }

Can business growth and efficiency be divorced from Merger and

13.

Merger and Acquisition doesnt enhance growth and ensure efficiency business operation? Yes No { { } }

14.

Does Merger and Acquisition enhance growth and ensure efficiency business operation? Yes No { { { { } } } }

15.

Is Merger and Acquisition a survival strategy? Yes No

16.

Is Merger and Acquisition an Effective strategy for revamping failing business? YES No { { } }

53