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Experts Canvass Merger Option For Banned CMOs

Ololade Julianah, Lagos

Experts in the nation’s capital market have called on Capital Market Operators (CMOs) disqualified in the last recapitalisation exercise by the Securities And Exchange Commission (SEC) to for merge among themselves of allow bigger operators to acquire them.

SEC, last week, in order to encourage more participants in the capital market, opened a window of opportunity for the operators, as it gave those that were unable to meet the September 30, 2015 deadline for new capital requirement, additional 15 months to recapitalise.

Director General, SEC, Mr. Mounir Gwarzo, who disclosed this at the 2016 post Capital Market Committee (CMC) press briefing, said the operators who were disqualified for non-compliance or inability to substantiate claims of compliance by the audit firms will be allowed to come back to the market once they show evidence of compliance within the stipulated period.

“We have given a grace of about 15 months from the initial deadline of September 30, 2015 to December 31, 2016. Operators who did not meet the requirement within this period will have their operating license cancelled,” Gwarzo said

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Stock market operators, who described the new directive from the SEC as a welcome development, advised the banned operators to seek the option of mergers and acquisitions to enable them meet the new capital requirements and return to the market. Managing Director Crane Securities Limited, Mr. Mike Eze, said that it was a known fact that one of the reasons recapitalisation was muted was to spur mergers and acquisition and boost liquidity and depth in the market.

Hence, operators in the market have suggested that the only way forward for the CMOs that could not meet the new minimum operating standards was to take advantage of window of opportunity offered by the regulator through the options of mergers or acquisition.

Eze said: “Mergers and acquisitions have become a worldwide commercial or business issue. They are usually initiated by investors especially in the advanced economies of the world to engender large and financially viable companies, which in turn facilitate the rapid growth and development of their economies.

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“They are also presently employed in other developing countries like Nigeria, where the unfolding scenario today requires the pooling together of resources for more optimal use in order to ensure economic rationalisation, economics of scale, survival and profitable growth.

“However, the successful merger and acquisition programme in the banking sector has put Nigerian banks among the global financial institutions, which have become increasingly dominated by large companies with the scope of their operations going beyond the national borders of the countries where they were originally incorporated”.

He noted that for the nation’s capital market to survive the current world economic recession, and also play a major role in the global economy, there is need for the CMOs in the country to explore the option of mergers and acquisition to build stronger financial and technical capacity, as emerging challenges will leave no room for fringe players in the industry.

The challenges, he said, leave no room for fringe players, as only the big players will be able to break even.

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Eze noted: “These difficulties, rather than stalemate our matching forward, should spur opportunities for mergers and acquisition in the industry not just as a window for survival but an avenue for significant and profitable players.

This option will guarantee efficiency and effectiveness; build stronger financial and technical capacity”.

The Institute of Capital Market Registrars (ICMR) had also advised market operators to seek the option of mergers and acquisition to enable them meets the new capital requirements. President/ Chairman of the Council, ICMR, Mr. Bayo Olugbemi, said the industry is highly fragmented with most of operators lacking both human and capital capacity.

He said: “I always advise that there is room for mergers and acquisition. What the regulators are doing is to strengthen the liquidity base of the operators. “I believe I rather be a one per cent owner of a living company than to be a 60 per cent shareholder of a dying rated company”.