Market Insights

The Philippines: A Dynamic Landscape for M&A Growth in Southeast Asia

By 6 March, 2024No Comments

Manila business district


  • The Philippines emerged as a fast-growing player in Southeast Asian M&A landscape backed by a robust economic growth.
  • Philippines’s investor-friendly policies are spurring foreign investment in M&A deals within renewable energy and telecommunications sectors.
  • Construction and financial services sectors remain pivotal in catalyzing M&A activities.

The Philippines emerged as a fast-growing player in Southeast Asian M&A landscape backed by a robust economic growth

In 2023, the Philippines demonstrated notable economic prowess by achieving a commendable full-year GDP growth rate of 5.6%. This performance positioned the country ahead of prominent Southeast Asia economies, including Vietnam (5.0%), and Malaysia (3.8%), highlighting its resilient economic performance and emergence as a vibrant and rapidly expanding market within the region. The sustained growth is driven by strong consumer spending and increased inflows of foreign direct investment, thus painting a promising economic outlook for the nation. Despite the challenges posed by global capital markets, foreign investors are increasingly recognizing the substantial opportunities within key sectors such as telecommunications, energy, and healthcare. This acknowledgment is further fueled by progressive legislation enacted by the Philippines, including the Public-Private Partnership Act, the Foreign Investments Act, and the Retail Trade Liberalization Act. These laws not only incentivize foreign investment but also attract inbound capital, thereby catalyzing the country’s economic expansion.

Graph showing Deal Volume and Values in The Philippines (2019 – 2023)

Philippines, together with Vietnam and Malaysia, emerges as rising stars contributing to regional M&A after Singapore and Indonesia. Over the past 15 years, the Philippines has markedly evolved into an attractive destination for foreign investments, prompting financial investors to explore the market further and contemplate additional avenues for engagement. Indeed, the country presents an appealing landscape for M&A activities, bolstered by favorable local demographic and economic conditions. Additionally, the track record of private equity firms in the Philippines, demonstrating robust returns in recent years, serves as a compelling indicator of the market’s potential.

Graph showing Deal Volume per Country in Southeast Asia (2023)

In August 2023, a significant transaction unfolded within the Philippine business landscape, marking the archipelago’s largest deal during the year. Aboitiz Equity Ventures, a prominent national conglomerate, in collaboration with UK-based Coca-Cola Europacific Partners, announced their acquisition of Coca-Cola Beverages Philippines, a key player in bottling and distribution, for an enterprise value totaling USD 1.8 billion. In April, the Philippines witnessed a significant transaction in the realm of social infrastructure and utilities. A consortium spearheaded by the Japanese conglomerate Mitsui & Co tendered an offer to acquire a 36.6% stake in Metro Pacific Investments, a prominent Philippines-based infrastructure entity involved in water utilities, power generation, toll roads, and hospital ventures, amounting to approximately USD 873 million. Subsequently, in July, the consortium revised its offer, increasing it to USD 992 million.

Notable deals in 2023

Philippines M&A notable deals in 2023Philippines’s investor-friendly policies are spurring foreign investment in M&A deals within renewable energy and telecommunications sectors

In 2023, the Philippines played a significant role in the Southeast Asian M&A landscape, with a total of 87 deals reported. Among these, the energy and natural resources sector emerged as the most active, accounting for 18 transactions with disclosed deal value of USD 678 million. The notable surge in activity within this sector can be attributed to the country’s escalating focus on sustainable and renewable energy sources. This trend is evidenced by the increasing investments in clean energy projects and the government’s proactive measures aimed at achieving its green energy objectives. Enterprises have received encouragement to employ and generate their renewable energy through Memorandum Circular (MC) 2023-006. Signed in October 2023, this memorandum grants companies engaging in self-financed energy efficiency projects entitlement to incentives such as income tax holidays and exemptions on duties for the importation of capital equipment, raw materials, and spare parts or accessories. Analogous to its counterparts in Southeast Asia, the renewable energy sector in the Philippines is poised to remain a pivotal force within the M&A landscape in the foreseeable future. Supported by a conducive regulatory framework and spearheaded by prominent domestic corporations, the renewable energy capacity of the Philippines is anticipated to surge more than triple during 2023-2029 period.

In terms of the telecommunication sector, revenue is projected to rise by USD 1 billion from USD 5.6 billion in throughout 2024-2029 period. A growth trajectory underpinned by robust initiatives from the Department of Information and Communications Technology (DICT) and the National Telecommunications Commission (NTC). To bolster the digital infrastructure in the Philippines, the DICT has committed USD 960 million, earmarked for disbursement towards the National Fibre Backbone and the Accelerated Fibre Build projects. Furthermore, revisions to the Public Service Act (PSA), permitting 100% foreign ownership in telecommunications entities, are poised to usher in a new era of opportunities and heightened competition within the sector, benefiting both incumbent and prospective market participants. The upsurge in transactional engagements within the telecommunications sector is notably augmented by governmental endeavors to achieve an ambitious objective to establish 50,000 common network towers nationwide. Moreover, the recent enactment of Executive Order 32 serves to streamline the operational processes concerning network infrastructure, eliminating the necessity for national or local permits in the construction, maintenance, and operation phases.

Construction and financial services sectors remain pivotal in catalyzing M&A activities

In addition to the energy and telecommunication sector, several other industries stood out in terms of M&A activity, including construction and financial services. Transactions within these sectors were predominantly driven by various factors, including the Philippines’ improving economic landscape, the expansion strategies of local and international companies, and supportive governmental policies. Collectively, these developments underscore the dynamic nature of the Philippine M&A market and its alignment with broader economic and regulatory trends.

Throughout 2023, transactions within the nation have centered on modernization initiatives in key sectors like construction, propelled by heightened government endeavors to allure foreign investments and enhance infrastructure development. The government’s allocation for infrastructure saw a substantial 7.3% year-on-year upswing in 2023, underscoring its enduring commitment to substantial investment in infrastructure over the medium term. In the forthcoming three years, it is projected that the construction industry will sustain its growth trajectory, expanding annually at a rate of 8.6% until 2027.

Regarding financial services sector, despite the presence of formidable challenges within the sector, such as escalated interest and inflation rates that could potentially compromise the viability of financing models, the financial services sector’s trajectory towards growth and modernization is perceived with considerable optimism. In 2023, the sector witnessed a remarkable deal performance, accumulating a total value of USD 1.5 billion, which constitutes roughly 24% of the national aggregate deal value.

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