Pandemic may spur more M & A

MANILA, Philippines — The Philippine business environment may see a number of asset purchases and mergers and acquisitions as some bigger companies and private funds are gobbling up those hit by COVID-19, seizing opportunities in the “new normal.”

Many private equity funds abroad, for instance, are taking interest in some Philippine companies that may need the investment at this time, brokers and investment bankers told The STAR.

“There has been increased interest from overseas to buy chunks of certain businesses given many have been hit by COVID-19 lockdown,” one source said.

There are ongoing discussions now, but nothing has closed yet, sources also said.

“This year definitely more overseas funds are looking to invest in local companies, but nothing big has closed,” one source said.

Last November, global investment firm KKR announced that it is expanding its presence in the Philippines with an investment into the telecom sector.

KKR invested in Pinnacle Towers Pte. Ltd. as part of efforts to build the leading independent telecom tower platform (TowerCo) in the country through Pinnacle’s principal subsidiary Frontier Tower Associates Philippines Inc.

Pinnacle specializes in building telecom tower projects, providing operators with capital-efficient infrastructure solutions to rapidly expand their coverage.

Rizal Commercial Banking Corp economist Michael Ricafort said the economic downturn is one of the best opportunities to be more aggressive for business expansion locally and internationally when many input costs are cheaper such as near record low interest rates, as well as lower costs of raw materials/commodities, property prices and lease rates, and other cost of investments and doing business, bargains that business empires can only aspire especially before the COVID-19 pandemic.

“Businesses that always do expansion and investments regardless of the economic cycle see the downward correction in asset prices as a very welcome development to bargain-hunt, presenting opportunities compelling for discounts in expansion and investment opportunities locally and even worldwide,” he said.

A separate report produced by the Oxford Business Group in partnership with the professional services firm Reyes Tacandong & Co. said there are indeed opportunities emerging in the Philippines for investors seeking attractively priced assets, following changes to the rules governing mergers and acquisitions (M&As).

The report considers the impact of the decision to exempt M&A transactions valued below P50 billion from review by the Philippine Competition Commission for a two-year period from September 2020.

“Elsewhere, the potential of the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act to improve the post-pandemic business and investment climate is also explored,” the report said.

In its coverage of the acceleration of tech-led innovation and implementation, the report also highlights the new openings in e-commerce and the digital payment segment, buoyed by mobility restrictions and other changes in consumer behavior due mainly to the pandemic.

“Largely internet-based businesses, as well as those selling essential goods and services delivered directly to the consumer, will see the most expansion. Other sectors set for investment include construction; health care; financial services, especially digital banking and financial technology; BPO; utilities; agriculture and industrial farming; and the export of labor services,” said Protacio Tacandong, COO, Reyes Tacandong & Co.