New PCC rules seen unlocking M&A deal flow

MORE MERGERS and acquisitions (M&As) activity is expected to result from the raising of Philippine Competition Commission (PCC) notification thresholds, freeing up smaller deals from compulsory regulatory review, analysts said.

China Bank Capital Corp. Managing Director Juan Paolo E. Colet said more transactions will be released from the review requirement in response to the changes.

“This will promote more efficient M&A dealmaking by dispensing with the need to notify the PCC for transactions below the new thresholds,” Mr. Colet said in a Viber message.

“The changes may also rationalize the agency’s load so that it can review notifiable deals more quickly,” he added.

Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said he also expects more M&A activity as a result.

“By raising the thresholds, the PCC potentially allows smaller mergers and acquisitions to proceed without mandatory notification, which could facilitate a faster and less complex deal process for companies below the new thresholds,” he said.

On Friday, the PCC raised the thresholds for transactions that need to undergo mandatory merger review to P7.8 billion for the size of parties (SoP) and P3.2 billion for the size of transactions (SoT).

Mr. Arce said that the change may help smaller companies to engage in deals with less risk of failing the competition review, saving on resources. It may also help bring about a more in-depth review process for notifiable deals.

“Companies no longer need to go through the additional step of notifying the PCC for smaller transactions, potentially saving time and resources,” he said.

“With a higher bar for mandatory notification, the PCC might dedicate its resources to scrutinizing larger transactions more closely, ensuring they don’t stifle competition. This could lead to more in-depth reviews for deals exceeding the thresholds,” he added.

However, he said that this could also lead to “missed opportunities,” as the reduced number of mandatory filings could result in failure to address potential competition issues in smaller deals.

“The impact might vary across industries. Sectors with a high concentration of players or where even small acquisitions can significantly affect competition might see a continued cautious approach from companies despite the raised thresholds,” he said.

“Companies aiming to circumvent review might attempt to structure deals to fall below the thresholds, even if the combined effect on competition is significant. The PCC would need to be vigilant in identifying such attempts,” he added.

Under the Philippine Competition Act (PCA), the PCC is authorized to review M&A deals and block transactions deemed harmful to competition.

The PCC has said that it has so far reviewed a 293 M&A transactions worth more than P5.49 trillion.

Last year, the competition regulator received 24 notifications of M&A transactions, with a combined worth of almost P610 billion.

“The majority of them came from the real estate, electricity and gas, and information and communication sectors,” the PCC said. —