Private Equity and Venture Capital Transactions under the Federal Competition And Consumer Protection Act

Posted on May 01, 2019

Introduction

Nigeria has recorded private equity investments valued at US$7.88 Billion in the last 5 years. Between January and February 2019 Nigeria is reported to have witnessed merger activities including private equity and venture capital (“PE/VC”) transaction valued at an estimated N277.65 Billion (US$767 Million). It is thus imperative to examine the implication of the Federal Competition and Consumer Protection Act on the structure, timing and risk allocation dynamics of PE/VC transactions in Nigeria.

Do PE/VC Transaction Raise Substantial Competition Law Concerns?

It depends on the facts and circumstances of the PE/VC transaction. An investors can be a (i) strategic investors who already owns a business similar to or complementary to that of the target company with the hope that a business combination will bring synergistic benefits (ii) long term investors desirous of entering the target’s business for varied purposes such as diversification of investment portfolio and (iii) financial investor such as PE/VC firms who raise funds for investment in the targets with the aim of holding the investment for a finite period (typically 3-7 years) with the hope of improving the target’s business performance and then reselling the target business for significant profit. Whilst competition law concerns are more with Strategic and Long Term Investors and less with financial investors such as PE/VC firms, there are some instances where competition law concerns arise in respect of PE/VC transactions. For example, where the PE/VC House with the aim of becoming a strategic or significant player in a market) has cross or overlapping shareholding and directorship in competing portfolio companies in the same market.

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