Heightened activity in the business sector around Republic Bank’s offer to acquire HFC Bank has drawn attention to the interesting discussion surrounding mergers and acquisitions.

In an age of globalization, organizations are becoming increasingly dependent on each other for survival and growth. Seeking symbiotic relationships negates the possibility of isolation, stagnation or simply becoming irrelevant and going out of business.

If businesses are to survive and thrive, strategic partnerships are one way of ensuring longevity. From mergers of equals to acquisitions, there is a regulatory process that simplifies and keeps everyone accountable. The Securities and Exchange Commission (SEC) is a regulatory authority which has and continues to be central to the process of one company acquiring another once entities are publicly traded.

Role of the Ghana Securities Exchange Commission

The SEC was established to protect investors and maintain the integrity of the securities market. In Ghana, its mission is to ensure that all investors who choose to invest - whether local or foreign, regardless of size, are treated without bias.

The SEC has four primary functions with respect to mergers and acquisitions. It must ensure that our securities market is efficient. The decisions taken by the SEC have ramifications for investors today and well into the future. The SEC must be able to enforce its rules as unclear decisions will have a negative impact on investor confidence in the Ghanaian market.

Efficiency

Secondly, it must function as a protector of investors. Even more critical is that the SEC must protect all investors. Big investors often have access to information that enables them to transact business easily amongst one another. One of the roles of the SEC is to ensure that when a company sells securities on the stock exchange all shareholders from Aflao to Paga to Wa have the same rights and opportunities to buy and sell.

Transparency

Thirdly, the SEC is responsible for maintaining order. Stock markets work better when there is transparency as it ensures that investors can buy and sell securities by relying on an agreed process. In the case of Republic Bank and HFC, by insisting that RBL makes a tender for HFC, the SEC is indeed helping and protecting all investors. As a generally prevailing principle, therefore, by insisting on a mandatory tender, the SEC is actually enhancing market integrity and investor confidence in Ghana.

Enable and Protect

Lastly, it sets out to increase the ability of companies to raise capital. The SEC plays a vital role in the economic strength of our nation. The Commission’s role in protecting investors makes it possible for companies to raise the funds needed to grow, and to ensure that our markets are operating fairly and efficiently. The exchange establishes an orderly platform for companies to raise capital. A well-regulated capital market enhances capital formation in Ghana. When a company lists its shares, it means it is subjecting itself to the rules of the Commission. These rules should make investing in companies less unclear and increase the likelihood that a company will be successful in raising capital. For example, when an investor buys shares in a listed company it accepts the SEC’s definition of “control of a company”.

According to the SEC rules, when that control position changes, it means minority shareholders should have the option of selling their shares to the controlling shareholder. In the RBL/HFC transaction, by definition of SEC rules, control of the company has shifted to RBL. Based on its regulations, the SEC is obligated to ensure that RBL offers to buy shares from all minority shareholders.

This requirement by the SEC is a positive one for Ghana as it indeed makes our capital markets more dynamic and enhances capital formation in the country.

HFC’s acceptance of RBL’s Offeror Statement demonstrates a maturing of our business sector and stock market. Following this adherence to process, shareholders should, therefore, be given the chance to consider whether to sell their shares in response to the mandatory offer. That is why it appears strange that there has been a news item suggesting that HFC management is proposing to go to court to prevent shareholders from exercising their rights to do so.