Private Equity Exits in Nigeria: An Appraisal Of Preemption, Drag-Along and Tag-Along Rights

A fundamental fact of private equity (PE) is that it has a definite time horizon, usually 5 to 10 years, within which the investment is expected to reach its maturity and return profits to the investors. The key ambitions are exit and profit. So, PE investors aim to avoid locking themselves into investment decisions from which they cannot conveniently disencumber themselves if their personal or business circumstances change or their investment objectives have been realized. Conversely, founders and other shareholders are also wary of PE exits that could negatively affect the quality of their investment and shareholding in a company and so seek to protect their interests as far as practicable. This brings to the fore the need to pay attention to provisions relating to exit in the composite package of documents forming a private equity investment. In this context, therefore, this article explores preemption rights, drag-along rights and tag-along rights, being some of the key provisions in private equity investments that may impact the exit strategies of PE investors in Nigeria and the interests of their co-shareholders, bearing in mind the relevant provisions of the Companies and Allied Matters Act 2020.