PwC upbeat on PH mergers, acquisitions

THE Philippines remains one of the more robust countries for dealmakers in terms of mergers and acquisitions (M&As), PricewaterhouseCoopers (PwC) said in a year-end report.

The country ranked 83rd in the 2022 Global Opportunity Index and PwC said “investors seem to be drawn to the Philippines’ resilient service-centered economy and strong domestic demand.”

It noted that 33 M&A deals worth $8.1 million had been sealed as of December 15, “with local and foreign investors primarily taking notice of the economic recovery of the service sector in the country.”

Most of the inbound deals came from China, Japan and other Southeast Asian countries.

“The reduction of mobility restrictions helped increase investor confidence as work and recreation activities gradually returned to pre-pandemic levels,” PwC added.

Technology and telecommunications were among the top M&A sectors, with reforms related to open towers and digital transformation during the pandemic tagged as drivers.

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With regard to the open tower reforms, the government has allowed shared ownership of antennas, transmitters, receivers and other cell tower components in the private sector. This has allowed telcos to commercialize their assets and fund expansion plans.

Deals in the sector were reached by Smart Communications Inc. (Smart) and Globe Telecom Inc. (Globe), with the former agreeing to sell and lease back 5,907 towers for $1.5 billion via transactions with Axiata Group Berhad and edotco Group Sdn Bhd for $800 million, as well as with DigitalBridge Group Inc. and EdgePoint Infrastructure for $667 million.

Globe, for its part, will also sell and lease back 7,059 towers for $1.6 billion to PhilTower Consortium Inc., Frontier Tower Associates Philippines, Pinnacle Towers Pte Ltd. and Miescor Infrastructure Development Corp.

As for the financial sector, PwC tagged Sumitomo Mitsui Financial Group and Sumitomo Mitsui Banking Corp.’s $465-million investment in Rizal Commercial Banking Corp. and the $423-million acquisition of a 100-percent stake in HC Consumer Finance Philippines by MUFG Bank Ltd., Mitsubishi UFJ Financial Group Inc. and Bank of Ayudhya Public Co.

“Other notable sectors in the country that are seeing sustained growth in M&A activities include power and energy, transportation, real estate development and industrial manufacturing. The high number of activities in these sectors were driven by the shift from coal to renewable energy (RE), as well as the impact of rising oil prices and other related raw materials,” PwC said.

It noted that last year, SM Investments Corp. entered the RE market through the 81-percent acquisition of Allfirst Equity Holdings Inc. for $306 million.

Moving forward, PwC said that as local regulations continue to change in support of M&A activities, “public and private companies are capitalizing on this opportunity to expand and grow their businesses.”

“Dealmaking in the country will continue to be driven by both public and private companies. As the Philippine economy continues to open, post-pandemic acquisition opportunities are anticipated to take place for private companies. Public company takeovers will continue to be mostly negotiated and contractual for some acquisitions of stakes in listed companies,” it added.

“The changing regulatory landscape may also present opportunities for companies and the country. As some amendments promote foreign investments in the country, these also allow full foreign ownership of certain companies in selected industries. Laws that will further drive foreign investments in the country include the Retail Trade Liberalization Law, Foreign Investment Act and Public Service Act,” PwC continued.

Emerging industries, particularly telecommunications, RE, insurance, logistics and agriculture are expected to generate M&A interest this year. Expanding 5G connectivity will drive continued commercialization of telco assets and the country is estimated to require up to 4,000 new towers per year.

RE firms, meanwhile, were forecast to further increase investments in alternative energy because of a moratorium on coal plants and declining sources of coal.

The insurance industry is also in foreign investors’ sights given talks between the Philippine Insurers and Reinsurers Association and companies representing capital firms from Korea, Thailand and Japan. With an incoming increase in the minimum capital requirement to P1.3 billion from P900 million, M&As are expected to become a “major option” for insurers unable to comply.

Lastly, the logistics market is expected to reach P1 trillion by 2024 given government plans that include the National Logistics Strategy that has mapped out 455 priority infrastructure projects. Agriculture investments are also likely, PwC said, following the emergence of agribusinesses and agricultural innovations such as data-driven farming and automation.


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