MERGERS AND ACQUISITION AND LEVERAGED BUYOUT: THE MODERN TREND IN THE BUSINESS ENVIRONMENT
ABSTRACT
    The global focus on mergers and acquisition in recent time demonstrated that the twin-concept is essential ingredients for business survival and by extension success. Mergers and acquisition has accounted for the most controversial and dramatic activities in the global corporate setting. The acquisition of one company by another is an investment made under conditions of uncertainty. The business environment which is either favourable or unfavourable is one of the determinate factors to showcase companies to be acquired and which companies are not to be acquired. The data for this research were collected through the administration of questionnaire, scheme of merger and related literature on accounting for mergers and acquisitions. Based on the finding, it was recommended that in order for companies to gain the full benefits of mergers and acquisition the target company must be carefull  selected, the cost and benefits must be thoroughly analyzed and the best beneficial price must be  agreed upon while both companies must integrated together with proper co-ordination of operations.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1    Background to the Study                    
1.2     Statement of the Research Problem            
1.3     Objective of the Study                        
1.4     Formulation of Hypothesis                    
1.5     Scope of the Study                        
1.6     Significance of the Study                    
1.7     Limitations of the Study                        
References                                
CHAPTER TWO: LITERATURE REVIEW
2.1     Introduction                            
2.2     Historical Review of Mergers and Acquisitions        
2.3     Mergers and Acquisitions in Bank Distress                
2.4     Types of Business Combination                
2.5     Classification of Merger                        
2.6    Types of Mergers                             
2.7     Acquisition                                
2.8     Leverage Buyout (LBO)                            
2.9     Strategic Reasons for Mergers                    
2.10     Benefits of Mergers                        
2.11     Financing Merger and Acquisition                    
2.12    Problems with Mergers and Acquisitions                
2.13    Factors to be considered in Mergers and Acquisitions        
2.14     Defensive Tactics against Unwanted Takeover        
2.15     Instruments of Hostile Bids                    
2.16 Those who are Involved in Mergers and Acquisitions           
2.17     Accounting for Mergers and Acquisitions             
2.18     Why Acquisition and Mergers Fails                
2.19     Guidelines for a Successful Acquisition             
2.20     Regulation of Mergers and Acquisitions             
2.21    Implementing A Merger and Acquisition Deal         
2.22     Brief Historical Background of Surveyed Companies    
References                                 
CHAPTER THREE: METHODOLOGY
Introduction                            
Research Design                             
The Population and Sample                    
Source of Data                             
The Research Instrument                     
Model Specification and Analysis Plan             
Operationalization of Variables                 
References                            
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
Introduction                            
Descriptive Statistics                         
4.3    Research Hypotheses                         
CHAPTER FIVE:    SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
Introduction                             
Summary of Findings                        
Conclusion                                 
Recommendations                        
Bibliography                             
Appendix                                 
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
The corporate atmosphere in most developing countries like Nigeria is characterized by peaceful and serene relationship between companies (Peter & Kenneth, 2006). Occasional Mergers and Acquisitions deals usually engineered by off shore parents of the local conglomerates and some peaceful mergers among few medium size local companies characterized the corporate terrain.
The Nigerian economy witnessed a remarkable improvement and growth during the period 1970-1980 when she experienced an oil boom (i.e increase in the production of crude oil and increase in its price in the international market). Corresponding with this timing was the fact that Mergers and acquisitions and the related field of diversities became integral elements in the strategic business initiative of well-managed businesses. By the early 1990’s the practice of Mergers and Acquisitions had been firmly established as a fine art and a proving technique for seizing competitive advantage and responding to the myriad forces challenging managers in the highly managed modern world. (February 2, 2006, http://en.wikipedia.org/wiki/merger).      
An essential ingredient of merger is the consent or agreement exercised by parties involved in the deal. Therefore a merger can aptly be described as the union or fusion or marriage between two or more independent firms or institutions under agreement or consent to form one new firm (Peter & Kenneth, 2006).
A cursory look at the spate of Merger and Acquisition bids in Nigeria revealed that, these bids are not pure arms length mergers as all the candidates as well as their buyers usually belong to the same group at the time of the transactions. For example Unilever Nigeria Limited acquired Cheseborough Products Industries Nigeria Limited (CP1) because of the takeover of the CPI’s parent company, Cheseborough Ponds of United States by the by the Unilever Group of the United Kingdom.
A real fascinating take-over especially among indigenous large quoted companies had not yet occurred in Nigeria. The country witnessed its first buy-out when the management of livestock foods through the investment vehicle (Adset) acquired livestock foods from Pfizer upon the latter’s divestment from the company in a transaction that involved a great deflate “financial engineering”. Nevertheless, what has been occurring with constant regularity has been mergers between quoted companies with foreign leanings Examples of merger arrangements in the Nigerian corporate scene are the then acquisition of Stering Health Limited by Smithkline Beecham, The merger of A.G. Leventis, Leventis technical and Leventis store: Coming together of Glaxo and Welcome to form Glaxo-Wellcome and the subsequent combination of Glaxo-Wellcome and Smithkline Beecham to form Glaxo-Smithkline. (Ilaboya, 2006) which were dictated by their parent companies abroad. In Nigerian Banking sector, the then acquisition of controlling interest in Continental Trust Bank by Standard Trust Bank before the final merger with United Bank for Africa. (llaboya, 2006).
Mergers by their nature are open to risk to failure and non-actualization of the strategic intent of the parties concerned. However, global statistics show a significant level of such failure rates. But in Nigeria, growth through Mergers and Acquisitions has remained a vital factor in the success of many businesses organizations operating in the economy. (Morgan, 2004) Mergers in Nigeria over the years has been a cause for proper analysis as it is fast becoming a national phenomenon with the just concluded mergers in the financial sector of the economy, warranting the need for proper assessment of the benefits and dangers associated with Mergers and Acquisitions.
In this period of dwindling financial resources due to sharp fall in income earned by economics agents (which is having a dismal effect on the level of savings in the economy and consequently a fall in funds available for investment), there is a dire need (for the sake of achieving real growth in Gross National Product) that the residual resources available should be reasonably employed.
Corporate restructuring in the Nigerian economy seems to be overripe and the government should start considering the introduction of fiscal and monetary tonics that will boost and brighten the chances of corporate reorganization. Such tonics can take the form of withdrawing the payment of withholding tax on interest accruing from funds advanced for corporate reorganizations, pursuing policies that will bring down interest rate as well as makes borrowing attractive, giving tax respites to newly reorganized businesses. The ripeness of the need for corporate reorganization and enterprises restructuring in Nigeria is supported by the Federal government privatization and commercialization programmes which is aimed at ensuring better corporate performance.
Re-organization through Mergers and Acquisitions has a lot of potential in stimulating economic growth of corporations as well as promoting the economic prosperity of the country. It should therefore be given a pride of placement by corporate strategists in the formulation of their corporate goals.
1.2     STATEMENT OF THE RESEARCH PROBLEM
Mergers all over the world are beclouded by so many setbacks as most business owners feel reluctant to dilute their holdings for fear of loosing control (Soludo, 2004). This fear most at times is related to the quest of owners to know the value of the business after the consummation of the merger deal and the value of the intending parties, so as to determine whether the merger was worthwhile.
However, in a developing country like Nigeria, The problem associated with mergers and acquisitions is that 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, retrenchment 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 strives 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 that are likely to be affected by 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, educating the non management staff to secure their support is usually more difficult.
The questions to which this study sought answers are as follows:                 
Is Mergers and Acquisitions a viable option for business growth?     
Do Merger and acquisitions lead to a better corporate performance?
What are the effect of business environment to mergers and acquisition?     
1.3     OBJECTIVE OF THE STUDY
The study intends to highlight on the factor militating against industrial growth and how economics of scale resulting from Mergers and Acquisitions can help to solve the problems.
To investigate into business in which mergers and acquisition can be of greatest use in Nigeria’s business environment.
To find out the benefits of Mergers and Acquisitions to Nigeria’s economic development.
To verify whether business environment will be favourable or unfavourable to Mergers and Acquisitions.
1.4     FORMULATION OF HYPOTHESIS
The following hypothesis were formulated to enable us achieve the objective of this work.
Hypothesis I
Ho:     Mergers and Acquisitions will not significantly be a viable option for business expansion.
HI:     Mergers and Acquisitions will significantly be a viable option for business expansion.
Hypothesis II
Ho:     Mergers and Acquisitions will not significantly leads to a better corporate performance.
HI:     Mergers and Acquisitions will significantly leads to a better corporate performance.
Hypothesis III
Ho:     Business environment will not significantly favour Mergers and Acquisitions.
HI:     Business environment will significantly favour Mergers and Acquisitions.
1.5     SCOPE OF THE STUDY
The scope of the study will examine the effects of mergers and acquisitions on the corporate growth in relation to the economic development of Nigeria. The research intensively covers the historical background of mergers, problems analysis, the nature types, essence, importance, constraints, the impact and implementation of mergers and acquisitions on the economic growth of Nigeria. In carrying out this research work, attention will be focused on two surveyed companies (OANDO PLC AND PATERSON ZOCHONIS INDUSTRY).
  1.6     SIGNIFICANCE OF THE STUDY
The study intends to provide the 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 acquisitions in business environment as a way out of financial distress will enhance the nation’s economic development in terms of economic down turn and recommendations made will be of immense importance to the companies of study.
The study will be beneficial and also serve as a reference to students of accounting and management as well as the public at large.     
1.7     LIMITATIONS OF THE STUDY
Mergers and Acquisitions is a broad topic and cover the entire economy at large. However, in view of the limited resources available and time constraint, I was unable to cover all the sectors of the economy. Only the reports of few companies involved in Mergers and Acquisitions were analyzed.
Notwithstanding these few limitations, the findings of this research achieved the major objectives of the study.
 REFERENCES
Agbonifoh, B.A. (2008) Strategic Management: Concepts, Principles and Decisions. Mindex Press Benin City.
Ilaboya, O.J. (2006) the ABC of Mergers and Acquisitions. O’Jay Whyte Gobal Consult Benin City.
Morgan, O. (2004) Due Diligence in Mergers and Acquisitions. Financial Standards. Lagos.
Peter Ikpamejo Fce and Kenneth Oboh ace (2006) Essays on Banking Consolidation in Nigeria (Mergers Motives and Consequences) The ICEN Publications.
Soludo, C.C. (2004) Consolidating the Nigerian banking Industry to meet the Development challenges of the 21st Century. A speech (Unpublished).