Corporate governance plays an essential role during mergers and acquisitions (M&A), ensuring that transactions are conducted with integrity, transparency, and accountability. Given the rapidly changing business environment, mergers and acquisitions are increasingly a common occurrence. The importance of maintaining strong corporate governance in M&A cannot be overstated. The recent acquisition of Nigerian Agip Oil Company Limited (NAOC) by Oando PLC provides a relevant example of how governance issues can shape public perception.

Corporate governance serves as the foundation for decision-making processes within organisations. It is particularly critical during mergers and acquisitions, where large sums of money, assets, and human resources are at stake. Effective governance ensures that the interests of all stakeholders, including shareholders, employees, and the public, are protected. This includes ensuring that all regulatory requirements are met, potential conflicts of interest are managed, and the long-term sustainability of the business is considered.

Mergers and acquisitions can sometimes lead to governance challenges. These challenges may arise from differences in corporate cultures, varying levels of transparency, or the potential for conflicts of interest. As such, companies involved in M&A activities must place a strong emphasis on governance practices to maintain stakeholder trust and avoid reputational risks.

The acquisition of 100% of Nigerian Agip Oil Company Limited's shares by Oando PLC is a significant transaction in the Nigerian oil and gas sector. While the acquisition marks a milestone for Oando, the speed at which the approval was granted has raised questions compared to other transactions in the sector, which have faced significant delays. The quick approval received by Oando for this acquisition has further amplified concerns about potential preferential treatment.

These issues underscore the importance of transparency and fairness in the approval process for mergers and acquisitions. When stakeholders perceive that a company has received preferential treatment, it can lead to a loss of trust, not only in the company itself but also in the regulatory bodies responsible for overseeing the transaction.

One of the key aspects of corporate governance during mergers and acquisitions is regulatory oversight. Regulatory bodies play a crucial role in ensuring that transactions are conducted fairly and following the law. This includes reviewing the details of the transaction, assessing its impact on competition and the broader economy, and ensuring that all stakeholders are treated equitably.

In the case of the Oando and Eni’s subsidiary transaction, the role of the Nigerian Upstream Production Regulatory Commission (NUPRC) in approving the deal has come under scrutiny. It has been argued that the commission may have acted too quickly in approving, raising concerns about the thoroughness of the review process.

For regulatory bodies to maintain credibility, they must demonstrate that their decisions are based on objective criteria and are not influenced by external pressures. This requires a commitment to transparency and accountability, as well as a willingness to engage with stakeholders to address their concerns.

Trust is a fundamental component of corporate governance. During mergers and acquisitions, maintaining stakeholder trust is essential for the successful integration of the two companies and the long-term sustainability of the business. When stakeholders, including shareholders, employees, customers, and the public, trust that the transaction has been conducted fairly and transparently, they are more likely to support the new entity.

It is therefore imperative for companies to maintain strong corporate governance practices throughout the transaction process during mergers and acquisitions. This includes ensuring that all decisions are made in the best interests of the company and its stakeholders and that potential conflicts of interest are managed appropriately.

Also, there is a need for regulatory bodies to be transparent and consistent in their decision-making processes.  Doing so will make them build trust among stakeholders and ensure that all transactions are conducted fairly and following the law.

Moreso, it is important to manage public perception during mergers and acquisitions. Companies must be proactive in communicating with stakeholders about the transaction, addressing any concerns that may arise, and demonstrating their commitment to transparency and accountability.

Mergers and acquisitions are complex transactions that require careful planning and execution. The importance of corporate governance in these processes cannot be overstated. Adhering to strong governance practices can ensure that companies conduct transactions fairly and transparently, protecting the interests of all stakeholders, and maintaining the trust and confidence of the public. Companies and regulatory bodies must be vigilant in upholding the principles of transparency, accountability, and fairness in all M&A activities. In doing so, they can help to foster a business environment that is both competitive and sustainable, benefiting all stakeholders involved.

Research & Advocacy Department,

Chartered Institute of Directors (CIoD)

28, Olawale Edun Road, (Formerly Cameron Road), Ikoyi, Lagos.