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Mergers and Acquisitions: a new business tool for a new Nigerian business age

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Okay, so we know that the McBrain & Company business model is dedicated mainly to fostering small business growth, but hey! Let’s face it, you should not remain small forever, and at some time in the future, you might need to take the next big business step. Quite frankly, organic growth just does not seem to cut it quick enough these days, particularly in a business climate like Nigeria’s where even modest profit declarations are gradually becoming hard to come by.

So, what better way to think of the next big step than through a merger, or better still, an acquisition? Though, this may be a business idea you might plan on effecting five to ten years down the line, nothing stops you from giving it serious consideration now. After all, if other companies have executed it successfully, why shouldn’t you?
So, here we go…We hope you learn from it.

Ever decided to take a stroll through the central business districts in any of Nigeria’s major cities? Besides the hustle, bustle, and exchange of goods and/or services and endless haggling, ever noticed something rather odd about any of these localities, particularly the brick and mortar establishments that usually line both sides of most of the streets? Well, we have. On more occasions than one can cares to count. And it is the fact that no one out there is offering a unique or totally novel business: banking and brokerage firms are mostly lined in concrete rows; and law firms are either across the street, or even across the hall, from one another. Even in less formal settings like Idumota or Ladipo, vehicle engine parts dealers form clusters everywhere. Businesses peddling online services are aplenty and quite frankly, sometimes it becomes mystifying to tell one product or service offering from another.

Of course, monopolies give terrible business advantages that do not benefit any free economy. However, these are cut throat financial times fraught with, crumpling turnovers, dwindling profits, and uncertain economic policies and upheavals. And competitors are stealing or wooing what little precious clientele, we can barely hold on to, with mouthwatering offers that we would find particularly ridiculous to even consider, let alone propose. In this cutthroat commercial environment we find ourselves, the time may have come for you to consider a not-so-novel, more aggressive business tool to ensure your enterprise stays ahead of the horde, particularly as new competition now seems to practically sprout by the day.

As earlier stated, the idea of mergers and acquisitions have been around since the initiation of business itself eons ago, but it seems businesses, especially the small companies, have been conned into foolishly believing that this a tool for only the biggies… Rubbish! Small as your business might currently be, you should seriously consider this route to business supremacy. Complicated as it seems on the surface, it could certainly make life, and of course business, much easier to bear if successfully executed, especially with professional help.

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Thus, in this series, we will try our best to simplify, a complicated but far-reaching and interesting topic, with the sole objective of enlightening your business path. First, let us break it down, shall we?

What is a Business Merger?
A business merger is a deal to unite two or more existing companies into one new, bigger, company. There are several types of mergers and also several reasons why companies undergo mergers. Most mergers unite two existing companies into one newly named company. Mergers are commonly done to expand a company’s reach into new segments, gain market share or further exert market dominance. All of these are done to please shareholders and create value.

In 2015 alone, the global worth of mergers was announced to be a whooping $2 trillion. The largest mergers in history have totaled over $100 billion each. Mergers continue to be a popular way to grow revenue for companies of varying sizes. They are usually done to gain market share, expand to new territories, and unite common products.

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Types of Mergers
There are three common types of company mergers:
• Horizontal
• Concentric
• Vertical Merger
Horizontal Merger
Horizontal mergers involve companies that offer the same products or services to the same kinds of customers. If you own a supermarket, for example, and you combine with another supermarket in your neighborhood, that is a horizontal merger. Horizontal mergers offer “economies of scale,” meaning that average costs decline as the company does greater volume of business and it increases revenue by offering an additional range of products to existing customers. Such mergers also increase market share. And they offer opportunities for cost savings by eliminating redundancies; where the original companies each needed their own purchasing department, advertising budget, benefits program and so on, the merged firm only requires one. This lets the new business exercise greater control over pricing.

Vertical Mergers
A vertical merger combines two companies that are involved in producing the same goods or services but at different stages of production. Say you own a manufacturing company that makes items out of plastic, merging with a company that processes raw plastic would be a vertical merger. It improves business efficiency by synchronizing production and supply between the two companies and ensuring availability of the items as needed. When companies combine in a vertical merger, competitors could suddenly face difficulty in obtaining important supplies, thereby increasing barriers to entry for new businesses and potentially reducing the profits of existing competitors.

Concentric Mergers
Concentric mergers, also called congeneric mergers, occur between companies within an industry that serve the same customers but do not offer the same products or services. If you owned a catering company, for example, and you merged with a business that rents tables, chairs, event tents and party equipment, that would be a concentric merger. Both companies appeal to customers who have events to plan, but not in the same way. Concentric mergers diversify the combined company’s offerings and allow the firm to benefit from areas of shared expertise. These mergers can also drive new business, because the firm becomes more of a “one-stop shop” offering more of the services that both companies’ customers are typically looking for.

Six Compelling Reasons to Consider a Corporate Merger
Combined Strength
Creating a larger company gives the combined entity more strength in the marketplace. Volume purchasing is one advantage. The larger entity purchases more of a given item than each company did by itself, so manufacturers give the combined company volume discounts.
Customer Acquisition
Merging allows a company to acquire customers quickly rather than taking more time and spending money to get established in a new market. The strategic decision to expand across a region or even into another country is one reason mergers and acquisitions take place. Bank mergers are often motivated by geographic expansion strategies.
Retirement of Owner
Many mergers successfully take place because the owner wants to retire and reap the rewards of all of his years of hard work in building the company by selling it to another, larger company. He may also elect to sell only a portion of his shares and keep the rest if he believes the company he is merging with will further build the value of his investment in the ensuing years.
Vertical Integration
Through all stages of the manufacturing process, a chain of transactions happens in which several companies play roles in creating the finished product and moving it through the distribution system. Along the way, each company earns a profit. A company may decide it will be more efficient and profitable to control the steps in the process itself. An oil refining company may decide to develop the capacity to drill for oil rather than purchase the oil from a supplier. One way to quickly develop this capacity is to merge with, or better still, acquire a company that already has drilling rights, production equipment and a transportation infrastructure to deliver the oil to refineries.
Synergies
Just like individuals, companies have different relative strengths. When they merge, each can take advantage of the other’s core competency. One company may have achieved excellent brand recognition in the marketplace but have products nearing the end of their life cycles with limited opportunity for sales growth. The other might be a newer company with an exciting and innovative product line ready to be introduced, but with limited marketing or distribution channels in place. Combined, they can quickly build the second company’s sales by taking advantage of the first company’s marketing strengths.
Pull Together a Fragmented Industry
Some industries are characterized as being fragmented, meaning there are a number of smaller companies all vying for market leadership. Individually, they may not have the brand strength or financial resources to achieve a position of dominance. A strategy of merging two or three of these smaller companies can create a more profitable combined entity because duplicated staff functions can be eliminated and production capacity can be shared.

To be continued…

About the Author
Whenever he is up nights, Brain Essien faffs around the internet gathering materials for detective novels he is not sure when he’ll ever publish. He likes to play investment and brand strategist in the mornings. and website architect/builder in the afternoons. On the weekends he likes to throw on a few apparels and gadgets and go bounce people out of their own parties if they become a handful. Besides that, he loves reading detective novels, building muscle, daredevil racing, video games, shadow chess and cooking.

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Personal Finance

How to improve your investing habit

Valuable tips to help you improve your investing habit and make more money.

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investor, Steps to investing, Steps to developing a growth plan for your business, Breaking down the biggest misconceptions young people have about investing , Here’s how your business can grow revenue in tough conditions (PART 1), Here are ways to find the right investor for your business, How to build up your investment knowledge, This simple advice could help solve your investment challenges 

The best route to financial freedom and wealth is by saving and investing your funds. With the rising inflation rate in the country, money saved in the bank is useless and would depreciate with time. The best thing to do as a smart person is to invest your money and sleep while your money works for you. Investment entails more than just knowing about the stock market and investing, it involves having a healthy investing habit. It takes a lot of study and growth to imbibe these habits. Keep reading for tips on how to improve your investing habit and make more money.

Keep at it 

A good investor doesn’t start today and stop tomorrow. You have to be consistent with your investment plan and learn not to eat all your returns. Reinvest your interest and keep investing till your last breath, that is how you make more money. When Albert Einstein was asked what man’s greatest invention was, he said ‘compound interest’. According to him, “compound interest is the eighth wonder of the world, he who understands it, earns it; he who doesn’t pay it.” Imbibe the art of reinvesting today and keep at it.

READ: 10 Actions That Can Make You a Succesful Investor

Have a plan

‘A goal without a plan is a wish.’ Having defined your financial goals, you should come up with a plan on how to achieve your goals. Gone are the days when you just invest blindly. To improve your investing habits, learn to plan ahead. Decide what to invest in, look out for the risks involved in your investment, calculate your interest rates and see if it would benefit you, and track your investment.

READ: Studying after COVID-19: How education will be changed in 2021

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Spend more time on research 

“It has long been the prevalent view that the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries”
An excerpt from the book, “The Intelligent Investor; The Definitive Book on Value Investing” by Benjamin Graham, updated by Jason Zweig.
The importance of research cannot be overemphasized. As a smart investor, you should do thorough research on the industries that have great potential and would give you better results. You should also do in-depth research on the risks involved in investing in specific industries. Arm yourself with enough data before investing.

Learn from your mistakes 

There is no successful investor that has not made a financial mistake or lost money due to some sloppiness. However, what makes you a better investor is the ability to learn from your mistakes and move on. This rule applies to all facet of life so it shouldn’t be new to you. If you make an error in your numbers or make some huge mistakes, pick yourself up and try again.

READ: MTN Nigeria records gain, investors profit up by N42 billion

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Wait on it 

You can not be an investor and not know how to be patient, disciplined and eager to learn. One of the habits of successful investors is patience. You have to learn how to let go of your funds and let it come back to you when it is ready. Also, the market won’t always be proposing huge returns or favourable investment plans; your patience will go a long way in helping you survive situations like this.

READ: Fidson reports over 500% increase in profit for 2019

Be a copycat but also think for yourself 

Do research on successful investors, find the ones that have the philosophy that aligns with you and follow their steps. You cannot know it all. You should also learn from their mistakes along the line; that is the key to becoming better than them. You must also be able to harness your emotions and think for yourself as an investor. Don’t underestimate the power of your intuition.

In addition to the tips listed above, below is the Buffet approach to investment, extracted from “The Warren Buffet Way: Investment Strategies of the World’s Greatest Investors” by Robert G. Hagstrom.

Explore the Nairametrics Research Website for Economic and Financial Data

  1. Never follow the day to day fluctuations of the stock market.
  2. Don’t try and analyze or worry about the general economy.
  3. Buy a business, not its stock.
  4. Manage a portfolio of businesses: Intelligent investing means having the priorities of a business owner (focused on long-term value) rather than a stock trader (focused on short-term gains and losses).

We wish you well on your investing journey.

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Personal Finance

6 things you must not do with your money

Money can go as fast as it comes, but you might just get to keep it for a long time if you follow these tips.

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Coming across this, you probably thought to yourself “what an interesting topic, I wonder what it has to say”. Well, we are right there with you. There are a lot of things you shouldn’t do with your money and even without reading further, you can probably outline about 20 things, (go ahead if you’d like to).

Trust me you’d have fun doing that because it was quite fun coming up with this list and we’d like to present to you the top 6 things we believe you must not do with your money. Have a fun read.

DO NOT BE UNINTENTIONAL WITH YOUR MONEY

Intentional living is important and it is something that has caught on over the years. To be intentional means to be deliberate in your actions and decisions. Basically, what you must understand from this is that you should not be impulsive with your money, whether in your spending, savings, and investment decisions, you must be deliberate. There is a popular saying that goes “failure to plan is planning to fail”.

It is necessary to always have a plan/budget for your money. Never leave your money to chance. Be intentional, be deliberate, and do not be passive with your money plans. To get started, you can focus on three steps; have a vision, create a plan, set limits. You can decide to be intentional with your impulse buying as well. When you create a plan and set limits and you do not go over that limit, even when you decide to splurge, you would still be on track to achieving your goals.

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DO NOT MAKE LARGE PURCHASES WITHOUT CONSIDERING THE FULL COST

Part of being intentional with your money is to avoid large purchases if possible. Things like buying a car or land/homeownership should not be taken lightly. Even if you can afford the down-payment at that time, you have to consider the other charges and fees attached. If you can meet up with maintenance and servicing then, by all means, go ahead. Otherwise, it’d be best to review that decision. One way to achieve such purchase though, if your current earnings aren’t sufficient to support an extravagant purchase is to have a savings or budget plan for it.

Even if you cannot afford a financial advisor, there is a good number of mobile apps that would help you make such a savings plan. If you are the type of person that whenever you come upon ‘windfall’ or unexpected income, you’re already thinking of how to spend it extravagantly, you need to have a change of perspective. Before you think of buying that private jet or getting that car, you need to ask yourself if you are fully capable of maintaining it. Making rash purchase decisions can lead to regrets later.

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DO NOT CASH YOUR PAYCHECK RIGHT AWAY

With the advancement in technology, most employees have the option to have their earnings paid directly into their bank accounts, rather than collecting cheques or cash. But no matter the form you collect your money; you must make provision for part of that money to be saved. Do not spend it immediately. You can automate payments such that a percentage of your monthly income goes directly into your savings account.

This helps to avoid the temptation of dipping into that fund because, “if you don’t see it, you won’t spend it”. Some companies provide retirement savings plans for their employees, a system whereby a portion of their salaries are deducted and paid directly into their retirement account. One such plan is the 401k, of which the Nigerian alternative is the Nigerian Pension Scheme, governed by the National Pension Committee (PENCOM).

(READ MORE: Cashless goes nationwide)

DO NOT PUT ALL YOUR MONEY IN ILLIQUID INVESTMENTS

While investments are fun, and a good way to build wealth, it is important to diversify and have variety. Remember the saying, “do not put all your eggs in one basket?”. The difference between liquid and illiquid investments is simply this; the ability to exchange something for cash. So the rate of liquidity is determined by how easily an investment can be converted to cash. Do not tie up your money by investing in illiquid investments. Your investment portfolio should be diversified.

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DO NOT SHOP EMOTIONALLY

The fact that we are biological beings does not mean we should not make logical decisions. Do not fall prey to ‘retail therapy’. Retail therapy is a term that is used to describe the action of shopping to improve one’s mood. It is also referred to as “comfort buys”, often acquainted with individuals who buy during periods of depression and stress. You are allowed to get emotional and you are also allowed to deal with that emotion, but talking to a sales representative or clerk just to make you feel better is not healthy.

Their job is to make sales, not your welfare. This is not intended to paint anyone in any sort of way but rather, to educate you. Instead of making that trip to the store or browsing that online catalogue, it would be better for you to call up a trusted friend or family member and talk with them. You’ll thank me for it.

DO NOT SIGN A CONTRACT YOU DO NOT FULLY UNDERSTAND

A contract is an agreement between two people that is legally binding. Four essential elements that make a document legally binding are; an offer, an acceptance, an intention to form a partnership, and a consideration that usually involves money. It can be oral or written. When it is oral unless recorded, there is no solid proof that an agreement was made, but, once it is written there is enough proof.

So before you go ahead and sign that piece of document, you must be fully aware of the terms and conditions of your agreement. Yes, a contract may, however, be considered invalid for specific reasons, but the bottom line is that you should avoid any situation that would put you in any money problem. It is more rewarding to get professional advice than implicate yourself unknowingly.

With all that’s been said, the crux of the matter is that you must be intentional with your money. Only then, can you plan, only then can you learn from your mistake, only then can you track your money movements, be deliberate, make decisions and take actions with a purpose. Develop a relationship with it (a healthy one of course), get to know your money, go on money dates and your financial health will bless you for it.

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MSME

FG says 174,574 successfully register for N75 billion MSME survival fund in 48 hours

174,574 persons have successfully registered for schemes under the Nigeria Economic Sustainability Plan.

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FG releases new details on MSMEs support scheme, budgets N200 billion for loans, FG says 174,574 successfully register for N75 billion MSME survival fund in 48 hours

The Federal Government has disclosed that a total of 174,574 persons successfully registered for the N75bn National MSME Survival Fund and the Guaranteed Off-take Stimulus schemes under the Nigeria Economic Sustainability Plan, within 48 hours.

The disclosure was made by the Minister of Industry, Trade and Investment, Ambassador Mariam Katagum, during a media briefing on the update of the schemes, on Thursday, September 24, 2020.

Mariam Katagum, in her statement, said: “As at 8.30 am this (Thursday) morning, total successful registrations stood at 174,574 with the following states having the highest applications as follows: Kano, 19,895; Kaduna, 13,575; Lagos, 13,640; Katsina: 8,383; Federal Capital Territory, 8,085.”

She stated that the registration for the MSME Survival Fund commenced on September 21, 2020, at 11 pm, and within 24 hours, approximately 138,000 individuals had logged on, created profiles and completed the first stage of registration with Kano, Kaduna and Lagos as lead states.

(READ MORE: Nigeria’s external reserves up by 7% in 21 days, currency speculators to lose over N10 billion)

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Going further, Katagum said, “All successful applicants received SMS and email verification with a list of requirements for the second stage of application which would commence on October 1, 2020. Applicants will be required to upload details supporting their applications which will be verified and if successful, approved for disbursements.”

The minister further disclosed the states that recorded the highest numbers of applications within the first 24 hours of registration; these are Kano, which recorded 16,880: Kaduna, 11,438; Lagos, 10, 530; Katsina, 7,354; and Bauchi, 6,622.

Explore the Nairametrics Research Website for Economic and Financial Data

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She also stated that registration for other tracks would start next with the hospitality industry coming on September 25, 2020, by 10 am; payroll support (others), September 28, 2020, 10 am; while artisan/transport grants would start on October 1, 2020.

Nairametrics had two days ago reported the opening of the portal for its N75 billion Micro, Small and Medium (MSMEs) Survival Fund and Guaranteed Off-take schemes with effect from 10 pm on Monday, September 21, 2020.

READ: Delivering mass housing as a path to Nigeria’s economic recovery

These two MSMEs initiatives namely MSMEs Survival Fund with payroll support track and the Guaranteed Offtake Scheme which are at the core of FG’s N2.3 stimulus package in the Economic Sustainability Plan, were introduced by it as part of the efforts to help businesses overcome challenges posed by the Covid-19 pandemic.

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