Protecting Shareholder Value In Mergers And Acquisitions: Disclosures And Pre -Emptive And Exit Rights Under Nigerian Law

Introduction

In recent years, Nigeria’s Mergers and Acquisitions (“M&A”) landscape has witnessed notable growth, driven by increasing investor confidence, regulatory reforms, and the strategic consolidation of businesses across sectors such as banking, financial services, energy, telecommunications, healthcare, and technology. During the first half of 2024, West Africa accounted for roughly one-third of all M&A transactions on the continent (excluding South Africa), with deals valued at approximately US$3.05 billion. Notably, Nigeria represented 57% of these transactions, nearly half of which involved private equity investments.¹ This surge in deal activity has also intensified focus on one of the most critical aspects of M&A transactions, which is the protection of shareholder value.

M&A transactions in some cases involve changes in control, valuation uncertainty, and governance risks that can materially impact both majority and minority shareholders, depending on the transaction structure. Accordingly, transparency through full disclosure and the availability of fair exit mechanisms remain essential safeguards to uphold shareholder confidence, market integrity, and fairness throughout the transaction process.²

This article examines how Nigerian law protects shareholder value in the context of M&A, with particular emphasis on disclosure duties and exit rights, and considers whether the existing framework sufficiently balances investor protection with deal efficiency.

The Legal Framework for M&A in Nigeria

One major aim of Nigeria’s M&A legal regime is to ensure that shareholders, particularly, are treated fairly, fully informed, and adequately compensated in any merger, acquisition, or restructuring. In practice, protecting shareholder value during mergers and acquisitions in Nigeria is achieved primarily through a combination of transparency (disclosure) and fair treatment (exit rights) as required under Nigerian corporate and securities law.

The disclosure obligations ensure transparency and informed decision-making by the shareholders prior to approving or consenting to a merger or an acquisition, enabling them to properly assess the impact of the deal on their rights, interests, and the overall value of their investment.³

Exit rights ensure fair compensation and remedies where shareholders dissent or are adversely affected, providing mechanisms that allow them to withdraw from the company, receive fair value for their shares, or seek judicial relief against oppressive or prejudicial conduct⁴.

Under Nigerian law, these principles are reflected in a variety of regulatory frameworks, including the Companies and Allied Matters Act 2020 (“CAMA”), the Investments and Securities Act 2025 (“ISA”), the Securities and Exchange Commission (“SEC”) Rules, 2013 (“SEC Rules”), and the Rulebook of the Nigerian Stock Exchange, 2015 (the “NGX Rulebook”). Collectively, they aim to promote fair dealing, informed decision-making, and accountability in corporate organizations.

Disclosure Obligations

By section 711 of CAMA, where a scheme is proposed for the reorganisation or merger of two or more companies, the Court is required to sanction the scheme before it becomes binding on the companies.⁵ Also, where a compromise or arrangement is proposed between a company and its creditors, the company must make an application to the Court to order a meeting of the members. In practice, the shareholders receive a statement explaining the effect of the scheme and any material interests of the directors. This ensures informed decision-making before approval of any scheme.⁶

Sections 715–717 of CAMA, which provide for schemes of arrangement involving creditors and members, require full disclosure of the transaction terms, valuation reports, and independent expert opinions with respect to the scheme to be circulated to shareholders before court-ordered meetings where the scheme will be considered, and if thought fit, approved by the members or creditors. The relevance of this is that it ensures shareholders understand the impact of a scheme before voting, protecting them from uninformed dilution or loss of value. By detailed explanatory statements, disclosure of director interests, and judicial oversight, CAMA ensures that shareholders do not vote blindly. These provisions are intended to protect shareholder value by mandating full transparency of transaction terms, valuations, and potential conflicts before members take a binding decision. Similarly, where the target is a capital market operator, section 142 of the Investment and Securities Act, 2025 (“ISA”) requires full disclosure of the details of a scheme and the approval of the Court and the SEC before any merger, arrangement, or reorganization takes effect.

Sections 119–122 of CAMA imposes strict disclosure obligations to ensure transparency of beneficial ownership of companies. Any person who acquires at least 5% of the shares in a company, whether directly or through a nominee, must notify the company within 14 days, and the company must, in turn, notify the Corporate Affairs Commission. (See section 120, CAMA.) The obligation applies even if the person ceases to be a substantial shareholder within that period, and a similar notice is required when a person later falls below the 5% threshold, Section 121 (1) –(3) CAMA.

In M&A transactions, these provisions operate as safeguards against concealed control. By requiring timely disclosure of substantial shareholdings and nominee arrangements, CAMA prevents acquirers from quietly building influence or manipulating ownership structures around a deal. This ensures that the true holders of voting power are visible to the target, regulators, and counterparties, thereby reducing the risk of undisclosed influence, conflict of interest, or hostile takeover tactics.

SEC Rules on Mergers, Takeovers, and Acquisitions

SEC mandates the circulation of information memoranda, and valuation reports by the Company to the Shareholders. This ensures that shareholders can assess whether the offer or exchange ratio is fair, preserving their economic interest.⁷

To safeguard the interests of minority shareholders, the SEC Rules require a mandatory tender offer (MTO), which is triggered when an entity acquires 30% or more of a company’s shares. This mechanism ensures that all remaining shareholders are provided with a fair and equal opportunity to exit, thereby protecting their rights and preserving shareholder value. By requiring the acquirer to make an open offer on equitable terms, the MTO mitigates the risk of minority shareholder oppression and ensures transparency in change-of-control transactions. Prior to making the MTO, the acquiring entity must obtain approval from SEC in accordance with section 142 of the ISA and SEC Rules 445 to 447.

Nigerian Exchange (“NGX”) Rules

The NGX Rulebook requires that the NGX be notified in respect of price-sensitive events involving a company listed on the NGX. See Rules 17.1 and 17.2 of the NGX Rulebook. Such events include, but are not limited to, material acquisitions or disposals, changes in control or shareholding structure, significant corporate actions, financial disclosures, or any other development that may reasonably be expected to affect the market price of the company’s securities.

Rule 15.1 of the NGX Rulebook requires equal treatment of shareholders, in that all shareholders of the same class of an offeree company must be treated similarly by an offeror. Rule 15.2 of the NGX Rulebook requires companies to provide equal access to information for shareholders. By Rule 15.3 of the NGX Rulebook, shareholders must be given sufficient information and advice to enable them to reach a properly informed decision and must have sufficient time to do so. All relevant information must be made available to the shareholders. This prevents insider advantage and promotes market integrity, ensuring all shareholders have equal access to information.

Given that the NGX Rulebook only applies to publicly listed companies, this means that private- company shareholders may receive minimal or selectively curated information, enabling controlling shareholders or insiders to structure deals without meaningful scrutiny. Also, because NGX rules rely heavily on self-reporting, enforcement challenges persist as companies sometimes delay disclosures or adopt overly cautious interpretations of what constitutes “price-sensitive information”, thereby weakening the real-time transparency the rules intend to guarantee.

Federal Competition and Consumer Protection Act, 2018 (the “FCCPA”)

The FCCPA requires prior notification or approval to the Federal Competition and Consumer Protection Commission (the “FCCPC”) for transactions that meet the applicable thresholds.⁸ Although primarily a competition mechanism, the notification regime indirectly protects shareholder value by preventing anticompetitive consolidations that may reduce market efficiency, suppress post-merger performance, or distort investor returns.

Although the law, as contemplated above, imposes certain disclosure obligations, such as explanatory statements, valuation reports, and disclosure of interests, it does not define clear standards for the quality, independence, or depth of these disclosures. In practice, this gap allows companies to provide often boilerplate disclosures that technically comply with the law but fail to convey material risks, valuation sensitivities, or post-merger integration implications.

Exit Rights as a Mechanism for Value Protection

In practice, exit rights function as a critical safeguard for shareholders, including minority shareholders, protecting them from (a) being compelled to exit a company without being fairly compensated or (b) a transaction where their economic interests may be unfairly diminished or prejudiced.

Dissenting Shareholders’ Rights Under a “Squeeze-Out”

By section 713 of CAMA, an acquirer who has up to 90% of the shares must offer the dissenting shareholders on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed on as the Court hearing the application of either the transferee company or the shareholder deems fit.

Under section 713 of the Companies and Allied Matters Act (CAMA), an acquirer that has secured at least 90% of the shares of a target company is required to offer to acquire the remaining shares from dissenting shareholders. This acquisition must be made on the same terms as those under which the approving shareholders transferred their shares, or on such other terms as may be agreed or determined by the court upon the application of either the transferee company or the dissenting shareholder.

This statutory mechanism reflects a balance between majority rule and minority protection. It prevents a situation where a small minority is trapped in a company that has effectively changed control and direction against their will, while simultaneously enabling the acquirer to consolidate full ownership and control efficiently.

In practice, this provision applies where, pursuant to a scheme or contract (other than a takeover bid under ISA, 2025), shares in a company (the transferor company) are transferred to another company (the transferee company). Once holders of at least nine-tenths in value of the shares (excluding those already held by the transferee company or its nominees or subsidiaries) approve the transfer, the transferee may, within two months after the expiration of the initial four-month offer period, give notice to the dissenting shareholders of its intention to acquire their shares.

Upon receipt of such notice, unless a dissenting shareholder applies to court within one month to prevent the acquisition, the transferee company becomes both entitled and bound to acquire those shares on the same terms as the approving shareholders. This ensures procedural fairness and gives dissenting shareholders an opportunity for judicial recourse where they believe the acquisition terms are inequitable.

This provision can also be viewed through the lens of hostile takeovers. Even where an acquisition is resisted by a minority, the statute empowers the majority and the acquirer to complete the transaction, provided that due process and fair compensation are ensured. Thus, the law preserves transactional certainty while embedding value protection mechanisms for shareholders through transparent notice requirements, equitable pricing, and the possibility of court supervision.⁹ In other words, minority shareholders are not compelled to exit on unfavourable terms and are entitled to receive consideration that is equivalent to that received by the majority shareholders. In addition, they are protected by the possibility of court intervention to ensure fair value for the shares.

The exit rights under section 713 of CAMA embody the principle that shareholder value must be protected not only through participation but also through the right to disengage on fair terms.

Contractual Exit Rights: Shareholders’ Agreements: Tag-Along and Drag-Along Rights

Shareholders’ agreements often supplement statutory protections by providing specific exit arrangements among shareholders in the event of a merger or acquisition.

Tag-along rights allow shareholders to “tag along” with majority shareholders when the latter sell their stakes, ensuring they can exit on identical terms. This ensures that minority investors can exit on identical terms and conditions, thereby avoiding a situation in which the majority realise a premium for control while minorities remain locked into a new ownership structure they did not negotiate or approve on fair terms.¹⁰

Drag-along rights, conversely, empower majority shareholders to compel minority shareholders to sell on the same terms, but typically at a fair market price. While on its face this may seem coercive, such provisions are typically structured to ensure that all shareholders receive a fair market price and are treated equally in the transaction.¹¹

Both mechanisms promote certainty and liquidity in private M&A transactions, balancing control rights and value protection among different investor classes. Tag-along rights, in particular, prevent the marginalisation of minority shareholders by ensuring they benefit from the same premium or exit opportunity as controlling shareholders.

Pre-emptive Rights and Buyout Clauses

Pre-emptive rights protect existing shareholders by giving them the right of first refusal to purchase new or transferred shares before such shares are offered to new investors. This ensures that their ownership proportion and voting power are preserved. This allows shareholders the opportunity to prevent dilution of their interests within a certain time frame before a transaction proceeds. At the same time, the acceptance period strikes a balance between protecting shareholder value and maintaining transactional efficiency, ensuring that deal timelines are not unduly delayed while shareholder rights remain protected. ¹²

Buyout clauses (or put options) are also common in investment and joint venture agreements, allowing shareholders to compel the company or majority investors to repurchase their shares upon the occurrence of specific trigger events (e.g., change of control, breach of contract, or regulatory non- compliance).

These contractual rights enhance flexibility and predictability, enabling investors to control their exit strategy while safeguarding their economic interests in uncertain or unfavourable circumstances.

Offer for Sale

An offer for sale is a transaction in which existing shareholders sell their shares to the general public. The purpose of this transaction is typically to diversify their investment risk or to achieve liquidity. The shares are listed on the exchange by the shareholders' company; however, the revenues from the sale go directly to the selling shareholders, giving a clear exit strategy.¹³

In practice, exit strategies in Nigeria typically depend more on negotiated transactions than on public market exits. Effective exit planning requires early identification of potential trade buyers and sector- specific consolidation opportunities.

An offer for sale safeguards shareholder value by establishing a minimum offer price that serves as a valuation floor. The selling shareholders, in consultation with their advisers, determine a minimum threshold below which shares cannot be sold, thereby preventing exits at distressed or undervalued prices.

Additionally, the book-building process, which involves investors submitting bids specifying the amount of shares they wish to purchase and the price they are willing to pay within a threshold of the minimum price, is based on genuine market demand rather than fixed or arbitrary pricing.¹⁴ When demand is high, many bids come in above the minimum price, allowing the final offer price to be set at a higher price. The minimum price prevents value erosion, while competitive bidding during the book-building process creates the potential for pricing at a premium. As a result, an offer for sale operates not just as an exit route, but as a mechanism for preserving and maximising shareholder value.

Conclusion

Protecting shareholder value in M&A transactions requires a balanced framework that ensures transparency, fairness, and adequate remedies for investors. Nigerian law achieves this through a combination of statutory disclosure obligations, exit rights, regulatory oversight by the SEC and NGX, and judicially supervised schemes under CAMA.

These mechanisms work together to ensure that shareholders are fully informed and can either participate in or exit transactions on fair terms. While the existing regime provides robust protections, practical gaps remain in enforcement, the quality of disclosures, and the consistency of governance standards across private and public companies. Strengthening regulatory oversight and encouraging more rigorous transaction-level transparency could enhance investor confidence and ensure that Nigeria’s growing M&A market continues to evolve in a manner that promotes fairness, accountability, and long-term value creation.

Footnotes

1 DealMakers AFRICA, ‘DMA Q2 2025’ https://www.dealmakersafrica.com/dma-q2-2025 accessed October 23, 2025.

2 Demet Özkahraman and Çağla Yargıç, ‘Shareholders’ Rights in Mergers and the Protection of Minority Shareholders’ Rights’ KC Kılınç Law & Consulting (Mondaq, 13 February 2025) https://www.mondaq.com/turkey/shareholders/1583944/shareholders-rights-in-mergers-and-the-protection-of-minority-shareholders-rights accessed November 17 2025.

3 Baker Tilly Nigeria, ‘Highlights of Critical Changes Introduced by the Amended Companies and Allied Matters Act, 2020’ (Baker Tilly Nigeria, 7 August 2020) https://www.bakertilly.ng/insights/highlights-of-critical-changes-introduced-by-the-amended-companies-and-allied-matters-act-2020 accessed November 10,2025

4 Demet Özkahraman and Çağla Yargıç, ‘Shareholders’ Rights in Mergers and the Protection of Minority Shareholders’ Rights’ KC Kılınç Law & Consulting (Mondaq, 13 February 2025) https://www.mondaq.com/turkey/shareholders/1583944/shareholders-rights-in-mergers-and-the-protection-of-minority-shareholders-rights accessed November 17 2025.

5 However, restructurings and mergers are not limited to schemes and may be implemented through other transaction structures under Nigerian law.

6 Sections 715–717 of CAMA, 2020, provide for court approval and filing of information relating to the merger or arrangement, further reinforcing transparency. 7 Rule 432: requires merging companies to provide full and accurate information to shareholders and the SEC. Rule 435: Mandates a shareholder circular containing all material details of the transaction. Rule 437: Requires disclosure of directors’ interests and any related- party connections.

8 See section 93(4) of the Federal Competition and Consumer Protection Act, 2018 and Regulation 1 of the Notice of Threshold for Merger Notification Pursuant for the applicable threshold that will require the notification or approval of the FCCPC.

9 Amanda Opara, Chidinma Egwu and Faith Emmanuel, ‘Overview of Statutory Squeeze-Outs by 90% Majorities under Nigerian Law’ (G Elias, 2023)(https://www.gelias.com/images/Newsletter/Minority_Squeeze_Article_.pdf ) accessed October 25, 2025.

10 Darren Ormsby, ‘Drag-along and tag-along rights: what are they and key negotiation points’ (DWF, March 12,2024) https://dwfgroup.com/en/news-and-insights/insights/2024/3/drag-along-and-tag-along-rights accessed October 27, 2025.

11 Andrew Stilton, Sale of Shares and Businesses: Law, Practice and Agreements (3rd ed, Sweet & Maxwell 2011).

12 Obasi, Noble, Ibitola Akanbi & David Olajide, “Shareholder’s Right of Pre-Emption: Understanding Its Significance, Implementation, and Impact in Corporate Governance” (Mondaq, 30 July 2024) (www.mondaq.com/nigeria/shareholders/1499236/shareholders-right-of-pre-emption-understanding-its-significance-implementation-and-impact-in-corporate-governance) accessed November 7, 2025

13 Securities and Exchange Commission Nigeria, ‘Modes of Public Offering in the Capital Market’ (https://sec.gov.ng/our-mandate/development/investor-education/investment-basics/modes-of-public-offering-in-the-capital-market/) accessed March 24 2026.s

14 Lawretta Egba, ‘Book Building versus Fixed Price: Methods of Price Discovery’ss (Yochaa) (https://yochaa.com/book-building-versus-fixed-price-methods-of-price-discovery) accessed March 31 2026.

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