PCC studying valuation method for data assets in mergers
THE Philippine Competition Commission (PCC) is considering the possibility of taking into account the valuation of data assets in mergers or acquisitions.
In a phone interview, PCC Commissioner Johannes Benjamin R. Bernabe said the anti-trust body has recently dealt with mergers where the physical assets of the parties were less significant than the value of their data.
The PCC’s data valuation practices may affect the reporting threshold of merger deals — the point at which transactions need to be cleared by the commission — involving technology firms whose value is determined largely by the data they collect.
Citing the Grab acquisition of Uber’s Southeast Asian operations last year, Mr. Bernabe said the commission took note that the parties did not provide a valuation of their data in calculating their transaction’s value, which did not fall within the agency’s notification threshold.
“If you have a value of physical assets at $500,000, and in exchange you give up 27.5% of your equity when your market valuation is upwards $6 billion, what does that tell you? You are purchasing data which is not being valued properly. What is that data? It’s data of the drivers, whatever rider information is embedded in the systems that would have been transferred to Grab,” Mr. Bernabe said.
However, he noted that capturing data-driven transactions will need an adjustment to the PCC’s valuation method.
Mr. Bernabe cited an example from Germany, which factors in the transaction’s purchase price, as a viable model.
“Germany has adopted a valuation method that takes into account the purchase price because they realized that there are so many transactions going on in the members of the EU (European Union) where simply looking at the revenues generated would be misleading because the revenues may be minimal but the market valuation of these social media businesses are going through the roof. And why is it so? Because of the data that goes with the acquisition,” the PCC commissioner said.
“While we have only preliminarily discussed it, one issue that we will have to reexamine moving into the future is whether we can do what Germany did... because that would give input to the value of data that is being transferred,” he added.
Mr. Bernabe said the PCC has not come to a firm decision on the matter.
However, he said drafting the guidelines to notification rules is only a “fraction of the bigger picture” in assessing the impact of data on mergers and acquisitions.
“The more interesting exercise is really conducting an analysis on the substance of what happens once the data is in the hands of the merged entity,” he said. —