CHALLENGES OF MERGER AND ACQUISITION IN NIGERIAN (A Case Study of Telecommunication Sector)    


The paper examined the Challenges Of Merger And Acquisition in Nigerian with special reference to  Telecommunication Sector in Nigeria.

The project undertook the general introduction into the research work which led to the review of various literature that relates to the major variables involved in the research work.

To gather data for the analysis of the research, a sample of twenty five (25) staff each from MTN, Visafone, and Airtel were used to source data with the aid of a structured questionnaire. The data were presented on table in percentages.

Two hypotheses were formulated and tested with the use of Chi-Square technique. The analysis resulted into rejecting the null hypotheses and accepting the alternate hypotheses, hence deciding that;

There is a significant change in the operating performance of the acquirer following merger and acquisition deals. And

Merger and Acquisition will improve the contribution of the telecommunication sector to Nigeria GDP.

The result of the analysis was summarized, conclusion was drawn and recommendations were proffered to telecommunication operators and the Nigeria government.


Content Page

Title page - - - - - - - - - - i

Approval - - - - - - - - - - ii

Dedication - - - - - - - - - - iii

Acknowledgement - - - - - - - - - iv

Abstract - - - - - - - - - - v


1.1      Background of the Study                        

1.2      Statement of Problem                 

1.3      Objective of the Study

1.4      Research Questions

1.5      Statement of Research Hypothesis

1.6      Method to be used in Carrying out the Research

1.7      Significance of the Study

1.8      Scope and Limitations of the Study     

1.9      Definition of Terms           



2.1      Introduction                       

2.2      Merger and Acquisition in Nigeria Telecommunications

2.3      Distinction between Mergers and Acquisitions

2.4      Behavioural Issues in Mergers and Acquisitions

2.5      Mergers and Acquisition in Relation to Corporate Finance

2.6      Purpose of Mergers and Acquisitions  

2.7      Benefits of Merger and Acquisition

2.8      Activities of Mergers and Acquisitions

2.9      Performance of Merger and Acquisition 

Challenges/Failure of Merger and Acquisition

2.10   Solutions to Merger and Acquisition Challenges



3.1      Introduction           

3.2      Research Instrument Design

3.3      Sources of Data

3.4      Population of the Study

3.5      Sample Size and Sampling Technique

3.6      Restatement of Research Hypothesis

3.7      Analysis of Data


4.1      Introduction

4.2      Personal Characteristics of the Respondent  

4.3      Response of Respondents to the Problem Areas

4.4      Testing and Interpretation of the Hypothesis


5.1      Summary of Findings

5.2      Conclusion  

5.3      Recommendations






Mergers and Acquisitions (M & A) continue to be a highly popular form of corporate development. However, in a paradox to their popularity, acquisitions appear to provide at best a mixed performance to the broad range of stakeholders involved. While target firm shareholders generally enjoy positive short-term returns, investors in bidding firms frequently experience share price underperformance in the months following acquisition, with negligible overall wealth gains for portfolio holders (Agrawal and Jaffe, 2000).

The complex phenomenon which mergers and acquisitions represent has attracted the interest and research attention of a broad range of management disciplines encompassing the financial, strategic, behavioural, operational and cross-cultural aspects of this challenging and high risk activity. While in recent years research into the human and psychological aspects of M&A have increased in prominence, the M&A literature continues to be dominated by financial and market studies (Cartwright, 2005).

M&A research has tended to develop along discipline-based lines and this has brought detailed insights into a number of important aspects. However, it is arguable that this specialization has been at the cost of developing a more holistic understanding of what determines their performance and what consequences they bring.

For the purpose of this research work, focus will be made on merger and acquisition that has taken place in the Nigeria telecommunication companies. The challenges will be identified and viable solutions will be suggested.


Despite the goal of performance improvement, results from mergers and acquisitions (M&A) are often disappointing. Numerous empirical studies show high failure rates of M&A deals. Studies are mostly focused on individual determinants. A book by Thomas Straub (2007) "Reasons for frequent failure in Mergers and Acquisitions" develops a comprehensive research framework that bridges rival perspectives and promotes a modern understanding of factors underlying M&A performance.

Merger and Acquisition in the Nigerian telecommunication industry has not really made wave in the industry unlike the banking industry. Most of the merger and acquisition deal  of the telecommunication industry end at the pre-merger stage, those being acquired still perform below expectation. Econet has been acquired six times since inception, and lately acquired by Airtel yet still on the bottom list of the performance chart of GSM in Nigeria. The merger and acquisition of Multilinks  (a CDMA operator) by Starcomms, Visafone, and other bidders also failed several times, not until recently it was acquired by Visafone. For the past seven months after the deal, Visafone has not synchronized  the two network. Subscribers of multilinks still recharge with multilinks card.

It is obvious that there is a great challenge with merger and acquisition in the Nigeria Telecommunication industry. It is on this note, the researcher sees the need to investigate on the challenges faced by this sector in term of merger and acquisition.

1.3            OBJECTIVE OF THE STUDY: 

The aim of this research work is to investigate the challenges of merger and acquisition with special reference to the telecommunication industry. Objectives of the research work includes:

Examine the performance and underperformance of telecommunication industries after merger or acquisition. Examine the merger and acquisition deals that has been transacted in the Nigeria telecommunication industry. Identify the benefits of merger and acquisition in the telecommunication industry. Investigate the functions of the performance / underperformance after merger and acquisition in the telecommunication industry. Proffer suggestions/solutions to challenges of merger and acquisition in the Nigeria telecommunication sector. (project topics   final year project topics and research materials )


Research questions are meant to generate possible answers to different aspects of the research problem and they should be clearly stated such that they act as guides in identification, collection and analysis of relevant data. In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions.

Does merger and acquisition improve the operating performance of the acquirer companies? Is the net earnings at the post merger and acquisition period significantly different from the pre merger and acquisition period? Do Merger and Acquisition techniques have any impact on the performance in the telecommunication industry? Does Merger and Acquisition improve the quality of service of telecommunication companies in Nigeria? Does Merger and Acquisition transactions facilitate the consolidation of asset management and provide better means and reputation in the telecommunication industry?


The objective of this research work is to investigate and identify the challenges of merger and acquisition in the Nigeria Telecommunication industry. To provide answer to the research questions the following two-sided hypotheses are formulated.


H0:      There is no significant change in the operating performance of the acquirer following merger and acquisition deals.

H1:      There is a significant change in the operating performance of the acquirer following merger and acquisition deals 


H0:      Merger and Acquisition will not improve the contribution of the telecommunication sector to Nigeria GDP.-

H1:      Merger and Acquisition will improve the contribution of the telecommunication sector to Nigeria GDP.


Research methodology deals with the procedure used by the researcher to conduct the study. It contains the different activities performed and methods employed by the researcher in the study. For the purpose of collecting necessary data for this research work, primary and secondary data collection method will be used. The primary data collection method will be through the following:

1.        Structured questionnaire

2.        Personal unstructured interview

3.        Observation

The secondary data will be collected from reports and documents from the company. Also, reports outside the company and from library and desk research literatures will be used.

In this study, descriptive method will be used to analyze data and also in resting hypothesis, chi-square (X2) will be employed. Findings from this research study will be discussed in the light of the research problem hypothesis, purpose research questions, literatures of the research and other relevant issues conclusions will be drawn and recommendations and suggestions also will be made.


As M&A research has developed largely along disciplinary lines, finance scholars have primarily focused on the issue of whether acquisitions are wealth creating or wealth reducing events for shareholders. The weight of evidence shows that while takeovers unambiguously bring positive short-term returns for shareholders of target firms, the long-run benefit to investors in acquiring firms is more questionable. Agrawal and Jaffe’s (2000) comprehensive review of this literature suggests that in aggregate the abnormal returns accruing to acquiring firms in the years following an acquisition are negative or, at best, not statistically different from zero. Importantly, these studies will also highlight the wide variation in acquisition performance at the firm level.

However, explanations of M&A underperformance cannot be sufficiently accounted for by the “goodness of the strategic fit” alone without account being taken of the wider integration process. Hence the researcher sees it important to investigate the performance and underperformance of merger and acquisition in the telecommunication industry, also identifying the challenges hindering the performance.


As there are great deals of factors determining Merger and Acquisition like the percentages of market share, growth in revenue competitive strength, technology capability, return on investment and overall size and the degree of satisfaction. It is very important to state that this research study will be focusing on the challenges of Merger and Acquisition in telecommunication industries as a means of survival in a distressed economy with empirical evidence from the Industry.

1.9       Limitations

In the course of conducting this research work it is expected that the following will constitute impediments to the effective conduct of the study

a)        Time constraint within which the study must be completed.

b)        Financial constraint

c)         Inaccessible and inadequate data

d)        Also, combining project work with several other activities is another stressful task that may not allow me to cover research materials extensively.

Nevertheless, I believe the above limitations will in no way affect the reliability and validity of the research study.

1.0            DEFINITION OF TERMS

MERGER: Is the combination of two or more companies to share resources in order to achieve common objectives. A merger implies that, as a result of the operation, only one entity will survive.

ACQUISITION: Is a business transaction between unrelated parties based on terms established by the market where each company acts in its own interest. The acquiring company purchases the assets and liabilities of the target company. The shareholders of the target company can no longer claim any ownership. In some cases, the target company becomes a subsidiary or part of a subsidiary of the acquiring company;

DE-MERGER OR CORPORATE SPLITS OR DIVISION: De-merger or split or divisions of a company are the synonymous terms  signifying a movement in the company.

STATUTORY MERGER: Statutory merger relates to the business combination where the merged (or target) company will cease to exist. The acquiring company will assume the assets and liabilities of the merged company. In most cases, the owners of merged companies remain the joint owners of the combined company.

SUBSIDIARY MERGER: Subsidiary merger relates to an operation where the acquired company will become a subsidiary of the parent company. In a reverse subsidiary merger, a subsidiary of the acquiring company will be merged into the target company.

CONSOLIDATION: Consolidation is a type of merger which refers to a business combination whereby two or more companies join to form an entirely new company.

VERTICAL COMBINATION: A company would like to takeover another company or seek its merger with that company to expand espousing backward integration to assimilate the resources of supply and forward integration towards market outlets. The acquiring company through merger of another unit attempts on reduction of inventories of raw material and finished goods, implements its production plans as per the objectives and economizes on working capital investments. In other words, in vertical combinations, the merging undertaking would be either a supplier or a buyer using its product as intermediary material for final production.

HORIZONTAL COMBINATION: It is a merger of two competing firms which are at the same stage of industrial process. The acquiring firm belongs to the same industry as the target company.

CIRCULAR COMBINATION: Companies producing distinct products seek amalgamation to share common distribution and research facilities to obtain economies by elimination of cost on duplication and promoting market enlargement.

CONGLOMERATE COMBINATION: It is amalgamation of two companies engaged in unrelated industries. The basic purpose of such amalgamations remains utilization of financial resources and enlarges debt capacity through re-organizing their financial structure.

TAKE-OVER: This is a form of acquisition where the acquiring firm is much larger than the target company. The term is sometimes used to designate hostile transactions.

REVERSE TAKE-OVER: An operation where the target company is bigger than the acquiring company. However, mergers of equals (in size or belonging to the same sector of activity) may also result in a hostile take-over.

DIVESTMENT: Selling of the parts of a company due to various reasons : a subsidiary or a part of a company may no longer be performing well in comparison to its competitors.

AMALGAMATION: It is a combination under a single head or a portion of the assets or liabilities of two or more industries unit by merger or consolidation.

TELECOMMUNICATIONS: The science and technology of communication at a distance by electronic transmission of impulses

GSM: Global System for Mobile communications

CDMA: Code Division Multiple Access (CDMA) describes a communication channel access principle that employs spread-spectrum technology and a special coding scheme

NETWORKS: A group of interconnected (via cable and/or wireless) computers and peripherals that is capable of sharing software and hardware resources between many users. The Internet is a global network of networks. See also local area network and wide area network.

SHAREHOLDERS: One who owns shares of stock in a corporation or mutual fund. For corporations, along with the ownership comes a right to declared dividends and the right to vote on certain company matters, including the board of directors.

OFFEROR: A person or entity who makes a specific proposal to another (the offeree) to enter into a contract

OFFEREE:      Person or corporation to whom an offer is made to make a contract

COMMUNICATIONS: A system that enables users of telephones or data communications lines to exchangeinformation over long distances by connecting with each other through a system of routers, servers, switches, and the like.



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