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Philippines M&A Market Overview

The Corona pandemic has proved to be devastating for local, national, and global economies. Almost every country, including the Philippines, has been facing aftershocks and is on its road to recovery.

  • The Philippines saw a mild-to-major downfall in its Forestry, Agriculture, Fishing, Services, Industry, and M&A market.

However, the question is, is the Philippines M&A market rebounding? Are there any significant changes in M&A regulations? What is happening in the M&A market right now? And what can we expect in the future?

Let’s have the answers to all these questions. But before that, it is better to have an overview of current M&A regulatory authorities, regulations, and laws.

Key M&A regulatory authorities

Corporation Code A general law that regulates the M&As and corporations in the Philippines.
SRC (Securities Regulation Code) It protects the stakeholder during the M&As of listed companies through additional requirements.
FIA (Foreign Investment Act, 1991) It regulates and defines the limitations for foreign investors/investments in corporations or industries in the Philippines.
PCA (Philippine Competition Act) This legislation regulates the pre-merger requisites and clearances before implementing the Mergers & Acquisitions.
SEC (The Securities And Exchange Commission) A government body at the national level which is responsible for implementing the following:

●         Securities Regulation Code

●         Corporation code

●         Foreign Investment Act

PCC (The Philippine Competition Commission) PCC primarily implements PCA and reviews Mergers & Acquisitions on the basis of the size of

●         Transaction thresholds

●         Party

Apart from that, PCC also deals with cases related to M&As validity as well as penalizing any type of anti-competition practices or acts (e,g, price-fixing, bid-rigging, misuse of dominant position.

 

BIR (Bureau Of Internal Revenue) It issues all the tax clearances that are mandatory for the transfer of all the assets, including shares, to the acquiring party (acquirer).

Current state of the M&A market

There is absolutely no doubt that the Merger & Acquisition market saw a steep downward curve in 2020. Still, it was one of those market areas that saw satisfactory economic activity during this period despite the fact that most of the business organizations were busy in organizational restructuring and making new agreements in response to the Covid-19 healthcare crisis. Moreover, the Philippines business sector is regaining its strength rapidly, and there are abundant expansion and investment opportunities in the market.

With that being said, the Merger & Acquisition market is likely to pick up pace in the next year. One of the most worth mentioning trends is organizations’ interest and openness to technological advancements, such as eCommerce-driven business markets.

The most important factors that may change the M&A market in future

The pandemic has not only hit the economies hard, but it has also forced the regulatory bodies to make necessary amendments and changes. Here are some important changes in the M&A regulations that will have a substantial impact on the market.

1. Merger exemptions

As per the Philippines Covid-19 response and recovery law (aka Bayanihan 2), all the mergers will be exempted from PCC’s mandatory notification requirement, if

  • The aggregate value of the merger is below PHP 50 billion, and
  • The mergers take place or are completed within 24 months of the law’s effective date of September 11th, 2020.

2. Revision in corporate code

The authorities have also made revisions in the Corporate Code and offered relaxations in procedures and rules related to corporation registration. This will persuade startups and companies to register as corporations, opening new gates for Mergers and Acquisitions.

This transformation to eCommerce-driven markets and switching to online platforms have also changed M&A practices as well. More and more companies are carrying out M&A processes through online channels such as data room services. Here is why VDRs are gaining prominence in M&A markets.

Reasons for using virtual data room software for Mergers & Acquisitions

1. Secure document storage

Mergers & Acquisitions contain loads of data in the form of documents, employees’ records, financial statements, agreements, etc. M&A data room allows the users to keep those documents under “unbreakable” security with the help of a two-step authentication process.

Most importantly, well-reputed virtual data room software possesses ISO 27081 compliance; this means your documents are far beyond the reach of third parties.

2. Less manual work

Now, M&As are a hectic and time-consuming process and involve a gruesome workload. However, the futuristic data room services have made life easier for its users. These VDRs offer amazing features such as

  • Dropping/dragging documents in a bulk form.
  • Auto-indexing
  • Full-text searches
  • Live link documents
  • Task assigning
  • Eliminate duplicate requests automatically
  • Report generation with a single click

3. Better organization and analysis of data

Virtual data room for due diligence (designed explicitly for mergers & acquisitions) usually has some AI-driven features built-in. AI features allow the users to organize and analyze the data more easily. This ultimately helps in multiple ways, such as;

  • Better workflow
  • Adapting to changes or new information throughout this process
  • Accumulation of helpful information that can help the business in the future.

4. Better collaboration between the stakeholders

VDRs also ensure that stakeholders (especially from different regions) can collaborate easily. The two-way information flow in data room services makes the communication process easier for all parties. This also improves the transparency throughout the process with the help of a centralized information hub.

5. Minimum distractions

Mergers & Acquisitions via traditional routes are always hectic and time-consuming. This keeps the management teams busy with excessive workload, and they fail to focus on the main deal process. However, VDRs minimize these distractions by automating the workflow.

Conclusion

The M&A market in the Philippines may have taken severe jolts due to the pandemic, but the future seems to be brighter. There have been positive changes in regulations and laws, which opened new roads for local and foreign investors. Technology, such as virtual data room software, is also playing its part in ensuring safe, smooth, effortless Mergers & Acquisitions.