Title Page                                                                         i

Certification                                                                     ii

Dedication                                                                       iii

Acknowledgements                                                          iv

Table of Contents                                                             v

Abstract                                                                           vii

Chapter One: Introduction                                            1

1.1      Background to the Study                                         1

1.2      Statement of Problem                                              3

1.3      Objectives of the Study                                            3

1.4      Research Questions                                                 3

1.5      Statement of Research Hypotheses                          5

1.6      Significance of the Study                                         5

1.7      Scope of the Study                                                   6

1.8      Limitation of the Study                                            6

1.9      Definition of Terms                                                  7

Chapter Two: Literature Review                                    9

2.1      Introduction                                                             9

2.2      Conceptual Framework                                            9

2.3      Theoretical Framework                                            11

2.4      Empirical Evidence                                                  14

2.5      Types of Merger and Acquisition                              16

2.6      Reasons for Merger and Acquisition                        17

2.7      Prospects of Merger and Acquisition                                19

2.8      Challenges of Merger and Acquisition                      22

2.9      Accounting for Merger and Acquisition                    25

2.10  Valuation of Merger and Acquisition                                28

2.11  Financing Merger and Acquisition                           30

2.12  Causes of Failed Merger and Acquisition                 31

2.13  Defensive Tactics for Merger and Acquisition           33

2.14  Regulation of Merger and Acquisition                      34

2.15  The Tax Implication of Merger and Acquisition                35

2.16  Summary of the Chapter                                          42

Chapter Three: Research Methodology                         44

3.1      Introduction                                                             44

3.2      Research Design                                                      44

3.3      Population and Sampling Procedure                                45

3.4      Validity and Reliability of Research Instrument               46

3.5      Data Analysis Techniques                                                46

Chapter Four: Data Presentation, Analysis

and interpretation                                                         49

4.1      Introduction                                                             49

4.2      Data Presentation and Analysis                                       49

4.3      Hypotheses Testing                                                  62

Chapter Five: Summary of Findings, Conclusion

and Recommendations                                                  70

5.1      Introduction                                                             70

5.2      Summary of Findings                                              70

5.3      Conclusion                                                              72

5.4      Recommendations                                                   72

References                                                               75

Appendix A                                                              78

Appendix B                                                              79

Appendix C                                                              81



This research work examines the implication of tax on merger and acquisition in the Nigeria’s banking industry. the banking industry is a sector that occupied a unique position in the nation’s economy. therefore, this research work has a critical look at the tax payable by merger banks in the post consolidation era that is, the gains and available tax relieves, banks are likely to enjoy after mergers, and acquisition exercise and it also found out that few merged banks enjoy these benefits. During the research, it was observed that some tax law on mergers and acquisition is not encouraged. But with some policy adjustment and recommendation given, those loopholes will be a thing of the past. According to our findings, regularity bodies were seen to have greater responsibilities to foster gradual and sustainable growth in relationship between the regulatory bodies and intending banks that want to merge or acquire another bank.








Nowadays, one of the ways companies improve their growth survival due to external factors and competitors is by merging with another company or acquiring them.

Merger and acquisition (M & A) is not a recent development but a global phenomenon. It is traced back to the United States of America (USA) where it is known, as merger wave. The first incident of merger wave was between 1897 and 1904. Further, merger wave were 1916-1929, 1965-1969 and 1984-1989. Modern merger and acquisition started in the early 1990s and has brought about greater achievement in the volume of transaction. Merger and acquisition have been an important tool for the bank reduction globally, example is the USA where banks had been reduced from 12,333 to 7,122 between 1980 and 1998. France and Denmark have also experienced a reduction on 43% and 57% respectively between the same period of that of the USA.

With the reforms in the Nigeria Banking Industry by the Central Bank of Nigeria (CBN) stipulate a minimum capital base of N25 billion from N2 billion, this gave rise to merger and acquisition which is one of the 13 point agenda of the then CBN Governor, Prof. Charles Soludo. As a result of the reform, most bank could not meet up with the N25 billion capital base or reserve in issuing of shares so it gave rise to consolidation. The first group of bank that merged was All State Trust Bank, Hallmark Bank, though; a memorandum of understanding (MOU) was signed to formalize the merger, but next was Intercontinental Bank Plc, Gateway Bank, Equity Bank of Nigeria and Global Bank Plc. Also was First Atlantic Bank Plc, Assurance Bank Plc, Manny Bank and Guardian Express Bank and the formation of a Mega Bank called Astra Bank.

Guaranty Trust Bank was the first to sign a memorandum of understanding to acquire Inland Bank. Also, UBA group acquired Metropolitan Bank on the 29th of May, 2007.

There is a wide range of issues to be addressed in any type of business such as legal, human resources, taxation, information technology, accounting issues. But, our focus is to critically examine the tax implication after merger and acquisition in the banking industry in order to evaluate the strength and beauty or disadvantages of consolidation.


In every merger and acquisition, there are tax implication so that the role of taxation in any consolidation should be taken seriously but most often tax implication are not really considered properly due to the fact that the authority rested with the powers and duty to introduce measures and policies is not effective.

Given this inefficiency in tax administration, tax revenue has continue to drop thereby making it increasingly difficult for government to deliver on their electoral problems. It is this problem of poor tax administration in Nigeria that this project intend to seek possible solution for.



The primary objective of the study is to critically analyze the implications of tax on banks after merger and acquisition. It strives to also achieve other objectives like:

i.            to determine tax gains enjoyed by banks in the post consolidation era.

ii.          To ascertain the reasons some banks fail in the post consolidation era despite tax gains and relieves.

iii.        To find out the extent to which legal and professional body can effectively control the tax aspect of merger and acquisition.


Due to such situation above, some research questions are being raised, such as:

i.            What are the tax implications on the banks after merger and acquisition, especially tax gains?

ii.          Why do some banks fail to grow despite available tax gains in the post consolidation era?

iii.        How do legal and professional bodies control and regulate the tax aspect of merger and acquisition?


Hypothesis is a conjectural statement of the relationship between two or more variables, (Speiga, 1992). In the course of the research work, the following hypothesis about the statement of problem will be tested in a null hypothesis.

a.     H0:   Tax gains and tax relieves do not determine the outcome of merger and acquisition.

b.     H0:   There is no relationship between effective control by regulatory bodies and the outcome of merger and acquisition activities.

c.     H0:    Poor management personnel do not impact negatively on the success of merger and acquisition.


To show that a research is important, it must make an impact on the society being studied. This research will be relevant in respect of the following:

a.           Researcher: It will serve as a reference point for the future researchers’’ interest.

b.           Shareholders: It will give more enlightenment to shareholders on the effect of tax after consolidation.

c.           Society: It will serve as a basis in educating members of the public on issues relating to tax and its implication during mergers and acquisition.

d.          Government: It will enable government to control and regulate the tax aspect of merger and acquisition.


This research is aimed at examining the aspect of tax in merger and acquisition in the banking industry.

Thus, the researcher will cover the post merger and acquisition in the banking industry while emphasizing on its tax implication or area.

This research will focus on the merger and acquisition of Ecobank Plc.


Research work is not an easy task, especially when one is researching into an area which people have not worked on.

They are bound to be some impediments and they include:

i.            The unwillingness of some of the staff of the bank to give required information necessary for the research works.

ii.          The sample size to be selected posses as a limitation to the study of the large nature of the banking sector.

iii.        The cost of collecting and analyzing data and other overhead costs involved in the research work.  


i.            Merger: This is a form of business combination in which the combining businesses lose their operational identify to form a new one for that same purpose.

ii.          Acquisition: This occur when there is a significant outflow of material resources (mostly cash) from an offer or (acquiring) company to the offers (acquired) company’s shareholders as purchased consideration for their holdings.

iii.       Capital Base: This is a paid up capital and reserves unimpaired by loses.

iv.        Consolidation: This is the aggregation of the values of the asset and liabilities of the subsidiary company and the holding company.

v.           Company: It is a corporate entity with complex network of contract binding on various interest groups.

vi.        Conjectural: This means to form an opinion about something even though you do not have much information on it.

vii.      Memorandum of Understanding: Is a record of legal requirement that has not yet been formally prepared and signed.

viii.    Tax: It is a compulsory levy imposed by the public authority on the income, profit or wealth of an individual, family, community and corporate or unincorporated body for the purpose of providing pubic infrastructure.

ix.        Taxation: It can be defined as the process of system of raising income through the levying of various types of tax.

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