Philippine M&As in the Time of Covid

Originally published on Lawyers Associated Worldwide

By Nilo T. Divina, Managing Partner, Danny E. Bunyi, Senior Partner, Ciselie Marie T. Gamo-Sisayan, Senior Associate

Amid the coronavirus pandemic, the Philippines encourage mergers and acquisitions (M&As) by easing government regulations, particularly the notification requirement to the Philippine Competition Commission (PCC) to determine whether said transactions pose anti-competition concerns.

Among the Philippines’ economic recovery measures found in Republic Act No. 11494, otherwise known as the “Bayanihan to Recover as One Act” or “Bayanihan 2” is the temporary adjustment of the threshold for M&As covered by the compulsory notification to the PCC as the country’s antitrust regulatory body. To promote business continuity and capacity building, Section 4(eee) of the Bayanihan 2 exempts M&As with a transaction value of below P50 billion from compulsory notification to the PCC within 2 years from the effectivity of Bayanihan 2. Additionally, Bayanihan 2 exempts such transactions from PCC’s power to motu proprio review the transaction for a period of 1 year from Bayanihan 2’s effectivity.

Prior to Bayanihan 2, parties to M&As are required to notify PCC if the transaction meets the following thresholds (i) P6B for size of person (which refers to the aggregate annual gross revenues in, into or from the Philippines, or value of assets in the Philippines of the ultimate parent entity of a party to the transaction), and (ii) P2.2B for size of transaction (which depends on the nature of the acquisition, e.g. asset acquisition outside the Philippines, asset acquisition inside the Philippines, or voting share acquisition).

In its Memorandum Circular No. 20-003, PCC clarified that transactions entered into prior the effectivity of Bayanihan 2 are not covered by the temporary adjustment of the compulsory notification threshold and the suspension of the motu proprio review by the PCC.

Although the PCC raised some concerns on the provisions of Bayanihan 2, PCC stated its recognition of the need to provide some regulatory relief during these times, and has refocused its resources to gear up for the resumption of its motu proprio review powers in September 2021.