NIGERIA Law and Practice Contributed by: Tosin Ajose, Izuchukwu Ubadinma, Deborah Leshi and Precious Omope, DealHQ Partners
Typically, the buyer (offeror) and not the financing bank makes the takeover offer. Banks or other financers usually provide proof of funding, such as a financ- ing commitment letter, bank guarantee or escrow arrangement, to demonstrate the offeror’s financial capacity to meet payment obligations. The SEC generally discourages takeovers or merger offers that are conditional on the bidder obtaining financing, as this would create uncertainty for share- holders. Bidders are expected to have reliable and verifiable financing arrangements in place before the offer is announced. 4.10 Types of Deal Protection Measures Target companies in the energy and infrastructure sector may grant certain deal protection measures to acquirers during mergers, takeovers or strategic investments, to enhance transaction certainty. A target company may agree to pay a break-up or termination fee if it withdraws from a transaction or accepts a competing offer after exclusivity has been granted. Such fees must be reasonable and not puni- tive, and should reflect the bidder’s legitimate transac- tion costs or opportunity loss. Excessive or coercive fees may be considered contrary to shareholder inter- ests or public policy. No-shop or non-solicitation clauses may be used to restrict the target from soliciting or encouraging com- peting bids during the exclusivity period. They are valid where they do not prevent the target board from considering superior offers in fulfilment of its fiduciary duty to act in the best interest of shareholders. Furthermore, an acquirer may negotiate the right to match a competing bid before the target can accept such an offer. This is common in competitive or regu- lated energy and infrastructure transactions, ensuring the initial bidder has a fair chance of maintaining its
jurisdictions. However, a bidder with a majority or controlling interest in a target company can exercise significant governance and control rights through both statutory and contractual mechanisms. The bidder can appoint directors proportionate to its sharehold- ing or negotiate board control under the transaction documents, ensuring influence over key decisions and strategic direction. The bidder may also negotiate specific matters that require its consent before the company can act, such as incurring major debt, asset sales, capital restruc- turing, dividend declarations or changes in business scope. The bidder and remaining shareholders may enter into a shareholders’ agreement defining voting arrangements, dividend policies, dispute resolution procedures and exit rights (eg, tag-along and drag- along rights). Depending on the level of sharehold- ing, the bidder can influence resolutions at general meetings. 4.12 Irrevocable Commitments In Nigeria, bidders often secure irrevocable commit- ments from key shareholders or institutional investors to support a proposed acquisition or merger. These agreements are executed before the offer is launched, and provide certainty that the bidder can obtain suf- ficient shareholder approval. Nigerian law does not prescribe a specific form for such commitments, and their enforceability depends on the contract terms. They often include clauses allowing shareholders to withdraw if a superior competing offer arises. 4.13 Securities Regulator’s or Stock Exchange Process Before a takeover or tender offer can be launched, the SEC must review and clear the offer. The SEC exam- ines the offer price, valuation, funding arrangements and fairness to minority shareholders, typically taking 20–30 business days. For listed targets, the NGX must be notified, although its role is mainly administrative. While the SEC approves the offer document, the bid- der manages the offer timeline, generally four to six weeks. If a competing offer is announced, the SEC may adjust the timeline and require additional disclo- sures in order to protect shareholders.
position without stifling fair competition. 4.11 Additional Governance Rights
In Nigeria, if a bidder cannot acquire 100% owner- ship of a target following a takeover offer, there are no statutory mechanisms equivalent to the domination or profit-sharing agreements found in some foreign
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