Legend Plc and Magodna Plc are two medium-sized companies in the plastics manufacturing industry; the boards of both companies have decided to embark on a merger. Interestingly, both companies have robust finance departments and upon completion of the merger, the board soon realizes that there are duplicated roles and that they are faced with ‘too many hands’ handling similar roles in the finance department. The company has now decided to lay-off some of its staff in the finance department.

In this light, this Article seeks to highlight, from a legal perspective, some of the implications of Mergers and Acquisitions on employees particularly as it borders on redundancy.


With the increasing trends in globalization, it is no doubt that Mergers & Acquisitions are essential tools for international growth and coverage. One of the primary objectives of Mergers & Acquisitions is wealth maximization; it aims at generating a synergy which strengthens an organization’s corporate reach.

On the other hand, organizations have begun to recognize human resources/employees as one of the critical success factors of any organizations. The Labour Laws across the world specifically focus on the rights of employees and protect this group of stakeholders from any specific injustice that may arise from the workplace.

Mergers and Acquisition {M&A}

In general terms, M&A refers to transactions in which the ownership of companies or other business organizations or their operating units are transferred or consolidated with other entities. As stated above, the primary objective of M&A is wealth maximization.

There is no doubt that M&A generally maximizes an organization’s wealth due to its potentials to create economies of scale, increased market share, cost reduction and increased synergy. Also, the companies are able to create greater value which ultimately increases their profit and pushes the organization to the fore of the industry.  

As a case study, popular Nigerian Access-Diamond Bank merger in 2018 has improved Access Bank’s standing in the banking industry due to the fact that the distinct potentials in Access Bank on one hand and Diamond Bank on the other, have all been submerged into one larger and stronger unit.  

It is thus important to note that M&A, if not properly monitored or regulated, could lead to monopolies in industries and generally hinder competition. Hence, the primary law regulating mergers and acquisitions in Nigeria is the recently enacted Federal Competition and Consumers Protection Act 2018 which established the Federal Competition and Consumer Protection Commission saddled with the responsibility of preserving competitiveness and regulating the conduct of M&A in Nigeria. Prior to its enactment, the Securities and Exchange Commission enacted by the Investment and Securities Act (ISA) Cap I24, Laws of the Federation of Nigeria (LFN) 2004; was the principal regulatory body for M&A while the Corporate Affairs Commission laws such as the Companies and Allied Matters Act (CAMA), Cap 20 LFN 2004 were overall regulatory frameworks.

It is important to note that ‘Mergers and Acquisition’ is only an umbrella term used to describe corporate restructuring of this nature. Thus, both terms have slightly distinct meanings.

What is a Merger?

By Section 92 of the Federal Competition and Consumer Protection Act, 2018.

A merger occurs when one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another undertaking”

In simpler terms, a merger can be described as a marriage; the combination or consolidation of two or more companies to form one.


There are three types of mergers namely; Vertical mergers, Horizontal Mergers and Conglomerate mergers.

  • Vertical Mergers are mergers between companies in the same industry but at different levels of production. In other words, this merger occurs between companies along the same supply chain. An example is where an automobile company merges with a steel producing company; steel is a major supply chain component in manufacturing cars.
  • Horizontal mergers are mergers between companies in a direct competition that is; companies in the same industry. A horizontal merger would occur if, for instance, Coca-Cola decides to merge with Pepsi.
  • Conglomerate Mergers are mergers that occur between companies in unrelated industries.

What is an Acquisition?

An acquisition, on the other hand, is defined by Rule 433, Securities and Exchange Commission Rules and Regulations (SECRR) 2013 thus:

“An acquisition means where a person or group of persons buys most (if not all) of a company’s ownership stake in order to assume control of the target company.”

Simply put, Acquisition is when one company purchases most or all of another company’s shares to gain control of that company. Usually, the acquired company may not change its name, but its ownership is transferred to the parent company/new owner.

How Does M&A Affect Employees?

A successful merger or acquisition invariably gives rise to employment-related issues stemming from the fact that in many cases, the employees’ continuous function in the new entity is subject to the need of the new employer.

Thus, there are two (2) broad possibilities for employees after M&A;

  • Some employees’ roles are rendered redundant and they are consequently laid-off.
  • Other employees retain their jobs and have to be integrated into the newly altered entity.


After a takeover or business acquisition, the first possible impact on employees is a potential corporate re-organization where the new employer decides that moving forward, the human resources of the company has to be ‘adjusted’.

This adjustment may be necessitated by the simple reality that after a merger the two companies may be faced with duplicated roles or simply ‘too many hands’ handling a particular role. Invariably, such a situation would lead to having some staff getting laid off as their technical expertise may no longer be required. 

Redundancy is defined by Section 20 of the Labour Act, thus;

“An involuntary and permanent loss of employment caused by an excess of manpower”

This definition goes further to show that redundancy, more often than not, results from circumstances surrounding the business rather than the performance of any individual employee. In this instance, corporate restructuring can alter or modify the existing course being charted by an organization.

It is important to establish that redundancy, where properly carried out, is a lawful action unlike other wrongful or unjustifiable termination of employment.

Protection of Employees in M&A

Unlike other jurisdictions, there is a dearth of statutory or judicial authorities protecting an employee from dismissal after an M&A in Nigeria. For instance, the United Kingdom is forward-thinking on the rights of employees as there are special laws designated to cater to employees’ rights in the event of an M&A. The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 2006 is a UK law which specifically provides that a business transfer must not result in a dismissal except for economic, technical or organizational reasons and in which case affected employees are entitled to a redundancy payment.

The only known palliatives available to ease the burden of redundancy in Nigeria are as provided by the Labour Act. They include:

  • Last in, First Out Procedure: This principle is entrenched in Section 20(1)(b) of the Labour Act, it models the Latin maxim “qui prior est tempore portio est jure” which means that he who is earlier is stronger in law. The principle borders on the selection for redundancy, if an organization is faced with the need to lay-off some of its staff.

The principle aims to guide against any unfairness that may arise from managerial discretion in redundancy and to ensure that those who have rendered their services to an organization for the longest time are not suddenly disposed of.

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  • Compensation for redundancy: Section 20(2) of the Labour Act empowers the Minister of Labour to make regulations for the compulsory payment of redundancy allowances for the termination of employment on the ground of redundancy. There is yet to be any regulation pursuant to this Section. Although, the Labour Act further provides that ‘the employer shall use his best endeavours to negotiate redundancy payments’, there is still a need to have laid-down standards for the payment of redundancy allowances in Nigeria.

Retained Employees

Although this category of employees retains their jobs, there are certain concerns that may arise from mergers and acquisition. Some of which are;

  • Change in governance/management and the need to be integrated into the new system.
  • A question may also arise as to whether there is a need to create a fresh contract of employment or automatically transfer the existing contract to the new employer.
  • There may also arise a need to adopt a slightly different pension scheme.
  • General anxiety: merger or acquisition is a big move and it may begin to cause anxiety on employees as there is a level of uncertainty regarding the future path the company might take.
  • Internal restructuring and other changes may be made to the existing structures in place in the organization.


  • Adequate Notice: It has been observed that Nigeria unlike other jurisdictions, does not have a mandatory provision that the Human Resources Department of companies be carried along in the process of a merger or acquisition. This is a necessary change that ought to be effected because employees as internal stakeholders of any organization should be well informed of any intending merger or acquisition as their rights would ultimately be affected by such merger or acquisition.

Also, in the event that staff is laid-off, they must be given adequate notice of such and an explanation as to why they were selected.

  • Redundancy Compensation: From the tone of the Labour Act, it is clear that the payment of severance fees is not a priority. It is submitted with the utmost respect that for an economy to show that it values its human resources, there must be clear steps in that regard. It is suggested that laws specifically addressing the treatment of employees after merger or acquisition be provided.



It is no doubt that with every M&A comes a change; a change which is necessitated by the simple reality that a re-construction has taken place. More often than not, employees are not carried-along or well equipped for these changes and as such, there is every tendency that anxiety and fear of job loss becomes the reality for these employees.

It is humbly suggested that for smooth transitioning after an M&A, management must develop effective communication with their employees during and after transition; and also make conscious efforts to develop post-merger strategies and plans that effectively cater to employees’ welfare. 


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