PwC Philippines said on Wednesday there is a positive outlook for business growth through mergers and acquisitions (M&A) in the country, given the strong macrofundamentals and renewed confidence on the government with the new leadership in place.
PricewaterhouseCoopers (PwC) Philippines Managing Partner for Deals and Corporate Jade Divinagracia said more and more M&A transactions have been recorded over the last few years, either by a local company acquiring another homegrown firm or a foreign investor buying in to a Filipino-owned corporation.
“In the last five to 10 years, you probably observed the rise in M&A transactions not just globally, but also in the Philippines. In fact, the number and value of M&A transactions in the Philippines is much faster than how it is on the global side,” she said at the media launch of PwC Philippines’s M&A Challenge for college students in the country.
Excluding outbound M&A deals, the executive said the increase in the number of inbound transactions started in 2013, with a total of 42 valued at $1.4 billion; 2014, with 51 transactions at $4.8 billion; and 2015, with 49 deals at $14.98 billion. As of August this year, 26 transactions worth $4.18 billion have already been posted.
“Of course, 2016 is just a partial year, plus we have the election period during the first five months when the people were waiting because of the uncertainty as to who will be the new elected leaders. But after the election, we saw that there’s again an uptick in terms of M&A activity,” Divinagracia told the BusinessMirror at a sideline interview.
The uptrend, she said, is being driven by the economic growth and business confidence brought about by President Duterte’s policy reforms.
The country’s GDP rate grew by 7 percent in the first half of 2016. Other factors considered would be the country’s rising population of over 100 million, consumer-base hike and continuous
flow of remittances from both the overseas Filipino workers and business process outsourcing industry.
“So with the money going around, people are really just spending on food and other basic necessities. Apart from that, people are also starting to look at what we call ‘capital investments,’” Divinagracia said. “Also, the interest-rate environment [is] very low, so people are not afraid to borrow.”
On the political side, the executive lauded President Duterte’s appointed Cabinet members “who are experienced people and very business savvy.” “I’m really happy to see that they’ve decided to continue on the economic policies of the past administration, which they believe would continue to work well for the country,” she said.
Duterte’s hard-line stance on drugs, while ensuring national security, she said, helps the growth of M&As in the marketplace here.
“I hope the President will be successful in terms of really addressing the peace-and-order situation in the country because it’s also a very important decision point for investors to come to the Philippines,” Divinagracia added. “If we’re able to project the country to be a safe place for both residents and businesses, then, I think there will be more people coming in. As we see now, the confidence is very positive.”
The managing partner for deals and corporate of PwC Philippines also noted the previous pronouncement of President Duterte to cut red tape and ensure the ease of doing business here. More importantly, she emphasied the intention of the new administration to lower income and corporate taxes, as Mr. Duterte announced during his recent first State of the Nation Address.
“If that happens, then, we will be more competitive, as there’s already interest in the country,” she said. Divingaracia noted, though, that other business concerns, such as the high power rate and poor infrastructure must be addressed in order to lure more investors.
“Still, we can see businesses coming in because there’s something we can offer in the Philippines. How much more if we address those things that are bugging us now,” she added.
While the country had a slow start this year due to the elections, she is optimistic the M&A marketplace will remain upbeat by end of 2016.
“If not equally as big as in 2015, but close to last year’s achievement, as we see a lot of these transactions happening. We only have four months left and, normally, things shut down towards the end of the year, like [in] December, [because of the] holidays. So maybe, that’s what is going to reduce the probability of having more transactions compared to last year,” Divinagracia said.
“By next year, I think that would be more positive because you’re starting with less uncertainty, there’s no more election fever, [and] people will be more focused in terms of what they want to do, rather than think of what’s going to happen next. So next year, I think, would be a good year for M&A,” she added.