The Nigerian business landscape, while rich with opportunity, presents a complex regulatory and operational environment for prospective buyers. The acquisition of a business-whether through a share purchase, asset purchase, or merger-demands a meticulous, legally sound approach that goes beyond procedural compliance. This article provides a comprehensive, strategic guide for buyers, offering deeper insights into deal mechanics, risk allocation, red flags, and the regulatory realities that can make or break a transaction.

1. Foundational Considerations: Structuring the Transaction

The first critical decision is choosing the transaction structure. The two primary vehicles are a share acquisition and an asset acquisition.

A share acquisition involves purchasing the shares of the target company, acquiring the entity “as is,” including all its assets, contracts, liabilities, and legal history. This structure is common for its continuity but means inheriting all potential liabilities.

An asset acquisition allows the buyer to select specific assets and liabilities. This can be advantageous for acquiring intellectual property, equipment, or real estate while avoiding unknown debts. However, certain licenses may not be automatically transferable, making regulatory due diligence essential.

For transactions involving public companies, the regulatory oversight is more stringent. The Investments and Securities Act 2025 (ISA 2025) now requires mandatory SEC approval for mergers, takeovers, and schemes involving public companies. Furthermore, a mandatory takeover bid rule prevents any single person from acquiring 30% or more of a public company’s voting rights without first making an offer to all shareholders.

2. The Pillar of the Transaction: Strategic Due Diligence

It is a fundamental principle that a buyer should “buy with their eyes open.” The due diligence process is the primary tool for achieving this. A comprehensive legal and financial due diligence should cover:

• Corporate Verification: A search at the Corporate Affairs Commission (CAC) to confirm the company’s legal identity, shareholding structure, and good standing. This is crucial, as failure to comply with statutory obligations like filing annual returns is a common red flag.
• Financials: An in-depth analysis of financial statements, tax records, and accounting practices is critical. Reviewing tax filings and clearance certificates can reveal unpaid liabilities or disputes with the Federal Inland Revenue Service (FIRS).
• Regulatory Compliance: This involves verifying all necessary licenses and sector-specific approvals. Ensuring compliance with the Nigeria Data Protection Act, 2023, is now a non-negotiable element, especially in data-rich sectors.
• Contract Review: A careful review of supplier, customer, and employment contracts is vital to uncover liabilities that may not immediately appear on financial statements.
• Sector-Specific Scrutiny: For regulated sectors (banking, telecoms, oil and gas, etc.), additional approvals are required from the CBN, NCC, NUPRC, or NAFDAC. The transaction’s timeline and feasibility depend on this.

🚩 Critical Red Flags to Watch For

1. Fake or Dormant Companies: A company’s name and number on a letterhead do not guarantee legal existence. Always verify the company’s status directly on the official CAC portal.
2. Disregard for Corporate Governance: Undocumented shareholder decisions or defective board composition are signs of instability.
3. Defective Asset Titles: In sectors like energy and real estate, incomplete or disputed land titles expose the buyer to potential eviction.
4. Unclear IP Ownership: Discovering that key technology was developed by contractors without proper assignment means the company may not own its core assets.
5. Unfavorable Contracts: Automatic termination clauses triggered by a change of control can cripple post-acquisition operations.

3. Navigating the Regulatory Landscape

Acquiring a business in Nigeria often involves navigating a web of regulatory approvals:

• Merger Control: The Federal Competition and Consumer Protection Commission (FCCPC) is the primary regulator. Notification is mandatory if the annual combined turnover of the acquiring and target companies is equal to or exceeds NGN 1 billion, or if the target’s turnover equals or exceeds NGN 500 million. The FCCPC can take up to 120 business days for review, though simplified procedures can reduce this to 45 business days.
• Approaches to FCCPC Approval: The FCCPC offers an accelerated procedure that reduces timelines by 40% upon request. For foreign-to-foreign mergers with a Nigerian nexus, the review can be concluded within 15 business days following payment of a NGN 10 million fee. Pre-filing consultations with the FCCPC are also available to identify potential competition concerns early, even on a “no-names” basis for confidentiality.
• SEC Approval: The SEC plays a crucial role for public companies. Mandatory filings include a “No Objection” letter from the relevant sector regulator and audited accounts of the offeror for the preceding period of five years.
• Duties of Directors: Directors owe a fiduciary duty to act in the best interests of the company. They must thoroughly review financial and legal information to ensure decisions are well-grounded and avoid conflicts of interest.

4. The Transaction Process and Documentation

A typical acquisition follows a structured process:

1. Negotiation and Exclusivity: Negotiations often begin with a Letter of Intent (LOI). It is common for the buyer to request an exclusivity period to prevent the seller from negotiating with other parties while due diligence is conducted.
2. Execution of Definitive Agreements: The most critical document is the Share Purchase Agreement (SPA), which addresses three core risks: completion risk, misevaluation risk, and value-shift risk.
3. Protective Provisions:
   • Conditions Precedent (CPs): These are milestones that must be achieved before the deal is closed (e.g., regulatory approvals, completion of due diligence). Failure to satisfy CPs can result in termination of the agreement by the buyer free from liability.
   • Representations and Warranties (R&Ws): These are statements of fact made by the seller. If untrue, they provide the buyer with specified remedies. Care should be taken to ensure disclosure letters do not exclude the value of the warranties entirely.
   • Indemnities: An indemnity provides a more powerful remedy than a warranty claim, as it does not require proving a breach but simply the occurrence of a specific event.
   • Tax Deeds: Separate documents providing specific protections for the buyer regarding the target’s tax affairs are increasingly common.
4. Post-Completion Filings: Following completion, filings must be made to update the share register and file a “Persons with Significant Control” notification with the CAC for any entity acquiring at least 5% of the company’s shares. Regulatory notifications to the National Pension Commission and tax authorities are also required.

5. The Buyer’s Guide: Dos and Don’ts

✅ DO:

• DO Independent Verification: Never accept company documents at face value. Verify with the CAC, FIRS, and sector regulators.
• DO Prioritize Legal and Financial Due Diligence: This is non-negotiable. A thorough review, conducted by qualified professionals, is the bedrock of any sound acquisition.
• DO Plan for Regulatory Approvals: Factor the time and cost of obtaining approvals into your timeline. The FCCPC can take up to 120 business days for a review.
• DO Consider Data Protection Compliance: Ensure your target is compliant with the Nigeria Data Protection Act, especially in technology and consumer-facing sectors.
• DO Design Robust Interim Arrangements: To mitigate “gun-jumping” risks (premature integration), implement clean teams and information barriers between competitors during the due diligence phase.

❌ DON’T:

• DON’T Skip Company Verification: Never proceed without a formal CAC search to confirm the target’s legal existence and good standing.
• DON’T Underestimate FCCPC Scrutiny: Regulatory approvals are not a formality. The FCCPC is becoming increasingly assertive in digital and consumer-facing sectors.
• DON’T Ignore the Impact of ISA 2025: For public companies, the new Act mandates formal SEC oversight. Plan for additional scrutiny and documentation.
• DON’T Overlook the Nigeria Tax Act, 2025: New tax and revenue administration protocols are expected, which could impact deal timing and compliance post-acquisition.
• DON’T Use Cash for Payments: Section 22 of the Foreign Exchange Act mandates that payments for property and securities must be made via bank transfers or cheques, not cash.

6. Conclusion and Strategic Outlook

Buying a business in Nigeria is a legally intensive process that requires strategic planning and rigorous attention to detail. The trajectory of Nigerian merger control suggests a gradual transition toward a more integrated system of market governance where competition regulation, consumer protection, and data governance are increasingly interconnected.

Looking ahead through 2026 and beyond, buyers should expect a more structured, compliance-oriented filing environment. The operationalisation of the ECOWAS Regional Competition Authority may increasingly require coordination of merger strategy across multiple jurisdictions. For boards, investors, and deal professionals, these issues are no longer merely legal compliance matters-regulatory concerns may materially affect transaction timelines, integration planning, valuation assumptions, and broader public messaging, particularly in consumer-facing and data-intensive sectors. Engaging experienced legal and financial professionals is essential to navigate these complexities and secure a successful venture in the Nigerian market.