Every acquisition begins with an attractive story. A thriving customer base, a recognisable brand, a strong balance sheet, a market position worth paying for. It can be genuinely persuasive, which is why it deserves a second look. What a seller presents is rarely the whole picture, and the gap between the story and the reality is where most acquisition regret is born.
Beneath the numbers, a business may be carrying unpaid taxes, unresolved lawsuits, undisclosed debts, property with questionable title, regulatory breaches, staff entitlements that were never settled, or intellectual property it uses freely but does not actually own. None of this usually appears in a pitch deck. It surfaces, if it surfaces at all, through due diligence.
Due diligence is simply the discipline of finding out what is actually being bought, legally, financially, commercially and from a regulatory standpoint, before the transaction closes. Done well, it comes down to one question worth sitting with: what exactly is this business, once the story is set aside?
In Nigeria, that question has grown more complex in recent years. Reforms to tax law, data protection, competition regulation and the capital markets mean that acquisition risk can now arise from several directions at once. The following considerations outline what a prospective buyer should examine.
- Determine the Transaction Structure
Before any investigation begins, the structure of the proposed transaction must be clear. Is the buyer acquiring the company itself, its shares and everything that comes with them, or is it acquiring specific assets from the business?
The distinction carries real weight. In a share acquisition, the company retains its existing obligations, and the buyer takes on its full legal history. In an asset acquisition, the buyer can be more selective about what it takes on and, depending on structure, may leave certain liabilities behind with the seller. This decision shapes the entire due diligence exercise and should be settled at the outset rather than worked out afterwards.
- Confirm Ownership and Control
A seller’s assurance that it owns the business is not sufficient on its own. Ownership should be verified against records held by the Corporate Affairs Commission [CAC], including incorporation documents, shareholding structure, share transfer history, registered charges and persons with significant control. Under the Companies and Allied Matters Act 2020, shares may only be transferred and registered in specific ways, and registration may be refused in defined circumstances. Where the documented position does not match what the buyer has been told, that discrepancy deserves further scrutiny.
- Examine the Financial and Tax Position
A business can appear profitable while carrying substantial liabilities. Financial due diligence should extend beyond headline revenue figures to examine debts, guarantees, contingent liabilities and related party dealings.
Tax matters merit particular attention. With the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 now shaping the federal tax framework, buyers should review registration status, filing history, outstanding assessments, pending audits or disputes, and any incentives the business currently relies on. A clean set of accounts offers little comfort if an undisclosed tax exposure exists beneath them, since that exposure passes to the buyer the moment control changes hands.
- Look Beyond Active Litigation
Pending litigation is straightforward to identify. The more difficult risks are those that have not yet crystallised into formal proceedings: a breached contract no counterparty has pursued, a regulator raising quiet concerns, an employee grievance that has not reached a tribunal. A thorough review should map not only current proceedings but the liabilities that could reasonably emerge after completion.
- Verify the Target’s Assets
A business may list land, equipment, receivables, licences and inventory among its value, but ownership must be confirmed rather than assumed. This involves checking title to property, identifying mortgages or registered charges (which CAMA governs), and establishing whether key equipment is owned outright or subject to financing arrangements. If the purchase price reflects an asset, the seller must be able to demonstrate that it can actually transfer it.
- Distinguish Ownership from Use of Intellectual Property
For many modern businesses, real value resides in the brand, the software or proprietary technology rather than in physical assets. Using an asset, however, is not the same as owning it. Buyers should examine trademark and patent registrations, copyright ownership under the Copyright Act 2022, and, importantly, whether intellectual property created by employees or external developers was properly assigned to the company. It is not unusual for a business to have built considerable value around technology that, on closer inspection, partly belongs to someone else.
- Account for Employment Obligations
Employees carry obligations of their own: unpaid salaries, unresolved disciplinary matters, restrictive covenants and pension contributions among others. The Pension Reform Act 2014 sets minimum contribution requirements, and shortfalls in this area can accumulate quietly into a genuine liability. A workforce with unresolved entitlements is a workforce the buyer is about to inherit.
- Review Material Contracts Closely
Many businesses depend on a small number of critical relationships: a major customer, a key supplier, a lease, a financing facility. These contracts should be examined for how they treat change of control, assignment and termination. A customer or lender may hold the right to withdraw, or to renegotiate terms, the moment ownership changes. Discovering this after signing is considerably more costly than discovering it beforehand.
- Consider the Regulatory and Competition Landscape
Different sectors carry different licensing requirements, and not every licence transfers automatically with a change in ownership. Separately, the Federal Competition and Consumer Protection Commission has stated, as recently as April 2026, that qualifying transactions must be notified for prior review and approval before implementation. Where a public company or capital markets element is involved, the Investments and Securities Act 2025 may also apply. These are not procedural afterthoughts; they can determine the entire transaction timetable.
- Treat Data Protection as a Deal Issue
Where the target holds customer or employee data, the buyer is inheriting responsibility for how that data has been managed. Under the Nigeria Data Protection Act 2023, buyers should examine what categories of data are processed, the legal basis relied upon, the security measures in place and any history of breaches. A data protection weakness rarely stays contained; it can lead to regulatory action and reputational harm well after completion.
A Problem Discovered Is Not a Reason to Abandon the Deal
Finding an issue during due diligence does not automatically mean walking away; it means the buyer now has leverage. Price can be renegotiated, the seller can be required to resolve the problem before completion, specific indemnities or warranties can be sought, funds can be held in escrow, or the affected asset can be excluded from the transaction. The purpose of due diligence is to allow these decisions before the risk becomes the buyer’s problem.
The Central Point
The most useful question in any acquisition is not simply how much the business costs. It is what exactly is being acquired, what liabilities accompany it, and what protection is needed before completion. A properly conducted due diligence process, one that feeds directly into how the transaction documents are drafted, is what turns those questions into answers and a risky purchase into an informed one.
Engaging experienced legal advisers early in the process does not delay a transaction. It ensures that the agreement ultimately signed reflects the business actually being acquired.
Team Vernia
