The Southeast Asian and Philippine M&A space

2023 mid-year review

Southeast Asia

Southeast Asian M&A Review

In the first half of 2023, Southeast Asia (SEA) showed a resilient M&A environment with average deal sizes similar to those in the first six months of 2022, at over US$190m. Despite challenges such as rising interest rates, supply chain disruptions, and regulatory changes, investors remained optimistic as the deal count and transaction values this year are expected to surpass pre-pandemic figures.

Sectors such as automotive, technology, oil and gas, and ESG-related businesses have driven the M&A environment in Asia and SEA this year. As interest in such industries continues to grow, investors and companies have continued to look for deals within the developing and emerging Southeast Asian markets.

Key highlights for the first half of 2023

Key highlights for the first half of 2023

Source: Mergermarket, Dealstreet Asia, McKinsey, Chambers and Partners

Deal volume and value in SEA (in US$bn)*

2019

433 Deals
2020

397 Deals
2021

628 Deals
2022

991 Deals
1H2023

377 Deals

*As per Mergermarket data

1H2023 Share of SEA deal values in the Asian M&A market


Hot sectors in SEA

Automotive

M&A activity in the region’s automotive industry gained traction with Southeast Asia’s landmark deal in 2023 as Black Spade Acquisition Co. acquired 100% of Vietnam-based electric vehicle manufacturer, VinFast Auto Pte Ltd., for more than US$23bn. Other deals include the acquisition of Lotus Tech, the China-based sports car developer, by L Catterton Asia for US$5.5bn.

Oil and gas

The SEA region has seen significant activity in the oil and gas industry. One of the sector’s key deals was Petroliam Nasional Berhad accepting a bid for its majority stake in Engen Limited, valued at around US$2bn. Several other firms, such as Bangchak Corp., PT Chandra Asri Petrochemical Tbk, and other companies in Thailand and Malaysia have also made major moves in the region.

Technology & AI

The technology and software development space has seen over 170 deals as digitalization continues to grow. One key transaction was StoneBridge Acquisition Corp's acquisition of Digiasia Bios for US$500m.

Artificial intelligence (AI) companies have been a hot topic for both consumers and investors. While AI firms are mostly based in western countries, SEA is expecting to see more AI deals and firms emerging in the coming years. Currently, companies such as Oracle, Anthropic and OpenAI have all received substantial investments, with Microsoft reportedly acquiring a majority stake in OpenAI for about US$10bn.

ESG investments

Investors continue to focus on ESG initiatives and the impact of their targets. Key transactions in the ESG environment include Black Spade’s purchase of an electric vehicle company, and ACEN Corp.’s acquisition of a stake in BrightNight LLC, a US-based renewable energy provider, for US$250m.

ESG investments are expected to remain strong as demand for renewable energy in SEA grows. To meet such demand, the International Energy Agency has collaborated with organizations, such as the Asian Development Bank, to create more investment opportunities across the region.


Notable SEA deals

Announcement date

Target company

Bidder company

Deal size
 (US$m)

Sector

11 January 2023

Esso (Thailand) Public Company Limited 

Bangchak Corp pcl.

778.4

Oil and gas

3 February 2023

Halcyon Agri Corporation Limited 

China Hainan Rubber Industry Group Co., Ltd.

1,574.4

Natural rubber

6 February 2023

Carlsberg South Asia Pte Ltd 

Carlsberg

744.0

Food and beverage

27 March 2023

Vietnam Prosperity Joint Stock Commercial Bank 

Sumitomo Mitsui Financial Group, Inc.; Sumitomo Mitsui Banking Corporation

1,526.5

Banking and finance

6 April 2023

Indihome 

Telekomunikasi Selular, PT.

1,366.1

Telecommunications

11 April 2023

Lian Beng Group 

OSC Capital Pte Ltd.

721.6

Construction

27 April 2023

Metro Pacific Investments Corp 

First Pacific Co Ltd; Mitsui & Co., Ltd., and others

874.2

Conglomerate (Water, Food, etc.)

12 May 2023

VinFast Auto Pte Ltd 

Black Spade Acquisition Co.

23,050.0

Automotive 

26 June 2023

PT Mandala Multifinance Tbk 

MUFG Bank Ltd; Mitsubishi UFJ Financial Group, Inc.; Adira Dinamika Multi Finance Tbk, PT.

571.0

Automotive 

27 June 2023

PT Medan Binjai Toll; PT Bakauheni Terbanggi Besar Toll 

Indonesia Investment Authority (INA)

830.3

Toll roads and construction

Source: Mergermarket

The Philippines

Philippine M&A Review

The Philippines has shown strong performance in deals aimed at improving public utilities, positioning the country as an area of opportunity for growth in critical industries. During the first half of the year, deals in the country focused on modernization efforts in industries such as telecommunications and construction, driven by increased government efforts to attract foreign investments and develop infrastructure.

Key highlights for the first half of 2023

Key highlights for the first half of 2023 (PH)

Source: Mergermarket

Philippine public utility deal values (in US$bn)

2019
2020
2021
2022
.0
1H2023

Deal volume and value in the Philippines (in US$bn)
 

2019

32 Deals
2020

32 Deals
2021

36 Deals
2022
.0
69 Deals
1H2023

42 Deals

Key deals and sectors

The Philippines' M&A landscape has seen a surge in deals in the telecommunications and construction industries with the majority led by domestic investors. While there were significant inbound investments from Singapore, the largest deal of the year so far came from a joint acquisition deal with Japanese trading house Mitsui & Co. Ltd.

Deals in telecommunications and real estate highlight capitalization opportunities in sectors where asset development is being prioritized. Meanwhile, numerous transactions across the food and beverage industry have demonstrated growth initiatives from local companies, along with an increased potential for international expansion. Deals that focus on construction, specifically in infrastructure, reflect how government initiatives for development have affected the M&A landscape as a whole.

Top sectors

PH Top sectors

Hot M&A sectors in the Philippines

Telecommunications

The largest deal in the telecommunications space so far has been the acquisition of 1,012 towers from PLDT by Frontier Towers Associates Philippines, a subsidiary of Singapore-based telecom operator Pinnacle Towers Pte Ltd for PH₱12.1bn. In addition, Unity Digital Infrastructure has committed to constructing 200 towers across the Visayas and Mindanao regions on top of the 447 towers they acquired from their deal with Globe Telecom.

The increase in deal activity in the telecommunications industry is further stimulated by government initiatives. These include their goal of establishing 50,000 common network towers across the country and the recently signed Executive Order No. 32, which aims to streamline the operation of all network infrastructure by no longer requiring national or local permits to construct, maintain and operate.

Food and Beverage

Food and beverage deals have remained a key factor in the country’s M&A space, with increasing interest in the distilled spirits market. Notably, the Philippines saw one of its largest deals as Diageo PLC (Diageo) acquired Don Papa Rum for US$473.2m. 

Internationally, the super-premium plus segment of rum showed a compound annual growth rate (CAGR) of 18% in Europe and 27% in the United States from 2016 to 2021.

Construction

In the first quarter of 2023, government spending on infrastructure showed a 7.3% increase compared to the same period in 2022, from PHP183.2bn to PHP200bn. The government plans to continue investing heavily in infrastructure over the medium term, with a target investment of 5-6% of the gross domestic product. As of March 2023, the current administration has approved 194 new infrastructure projects to compose a development pipeline worth PHP9 trillion.

Renewable Energy

Efforts to attract foreign investment in the country will include a shift to a renewable energy profile for power generation companies. The Philippines has the third largest geothermal capacity in the world at 1,900 MW, topped only by Indonesia and the United States. Initiatives by the government to tap into this potential include having renewable energy contribute 35% of the country’s power generation mix by 2030, and 50% by 2040. Given the moratorium on coal plants, power generation companies will also need to adapt their portfolio to expand.


Notable Philippine Deals

Announcement date

Target

Bidder 

Deal size 

(in US$m)

Sector 

5 January 2023

Bank of the Philippine Islands 

Robinsons Retail Holdings, Inc.

353.1

Finance

17 January 2023

Don Papa Rum 

Diageo plc

473.2

Food and Beverage

16 March 2023

Skycable Corporation 

PLDT Inc

123.1

Telecommunications

16 March 2023

PLDT Inc (Luzon Tower Portfolio) 

Frontier Tower Associates Philippines; Pinnacle Towers Pte Ltd

220.7

Telecommunications 

27 March 2023

The Podium West Tower and The Podium Mall 

BDO Unibank, Inc.

147.4

Real Estate

26 April 2023

Mico Equities 

House of Investments, Inc.

162.5

Insurance

27 April 2023

Metro Pacific Investments Corporation

First Pacific Co Ltd; Mitsui & Co., Ltd., and others

874.2

Infrastructure

7 May 2023

Globe Telecom, Inc. (447 Telecommunication towers) 

Unity Digital Infrastructure Inc

97.6

Telecommunications

2 June 2023

Top Frontier Investment Holdings, Inc.

Far East Holdings Inc

194.1

Energy and Construction 

5 June 2023

AREIT, Inc. 

Ayala Land, Inc.; North beacon Commercial Corp; Ayala Land Malls, Inc.

399.2

Real Estate

Source: Mergermarket

The year moving forward

Supported by government initiatives, deals in the country will continue to be driven by public and private companies. The Philippine economy grew by 7.6% in 2022, pushed by post-pandemic rise in consumption. Such sustained economic growth will promote expansion opportunities and entice foreign investments for further growth.

New M&A threshold

In March 2023, the Philippine Competition Commission (PCC) increased the threshold for mandatory notification of M&A deals. The previous thresholds for Size of Party (SoP) and Size of Transaction (SoT) were set at PHP6.1bn and PHP2.5bn, respectively, since the Bayanihan 2 Act in September 2022. The new thresholds indicate that M&A deals would need to breach PHP7bn SoP and PHP2.9bn SoT before requiring mandatory reporting and review by the PCC.

Government amendments supporting M&A

Republic Act No. 11659 allows public service companies in the Philippines to have 100% foreign ownership, except for those classified as public utilities and critical infrastructures. This opens up opportunities for increased foreign investments in these industries, enabling companies to utilize foreign expertise in the development and maintenance of infrastructure in areas such as telecommunications and airports.

Public-Private Partnerships (PPP)

Transport PPP projects are among the top priorities of the current administration, which aims to complete 194 infrastructure projects worth PHP9 trillion. One of the most prominent projects from this initiative is the approved PHP170 billion rehabilitation of Ninoy Aquino International Airport (NAIA). Slated to begin in 2024, the goal of the project is to improve all facets of NAIA’s operations from increasing passenger capacity in terminals to improving air traffic movement. 


Key takeaways

The recent regulatory changes in the Philippines are encouraging foreign investment activity in M&A deals, and this is a positive sign for emerging industries in 2023. In particular, the telecommunications and renewable energy sectors are poised for growth, and businesses can take advantage of this by prioritizing sustainability and modernization in their development strategies.

The government's focus on infrastructure development makes the country more attractive for M&A, driving innovation and business growth. With its favorable regulatory environment for foreign investment, growing economy, and focus on sustainable development, the Philippines offers a promising outlook for business expansion. Companies prioritizing strategic partnerships and expansion plans will have a competitive edge in this dynamic market.

Contact us

Roderick M. Danao

Roderick M. Danao

Chairman and Senior Partner, PwC Philippines

Tel: +63 (2) 8459 3065

Alexander B. Cabrera

Alexander B. Cabrera

Chairman Emeritus, PwC Philippines

Tel: +63 (2) 8845 2728

Mary Jade T.  Roxas-Divinagracia, CFA, CVA

Mary Jade T. Roxas-Divinagracia, CFA, CVA

Deals and Corporate Finance Managing Partner, PwC Philippines

Tel: +63 (2) 8845 2728

Karen Patricia Rogacion

Karen Patricia Rogacion

Deals and Corporate Finance Partner, PwC Philippines

Tel: +63 (2) 8845 2728

Joaquin Antonio Augusto Ermitano

Joaquin Antonio Augusto Ermitano

Deals and Corporate Finance Associate, PwC Philippines

Tel: +63 (2) 8845 2728

Martin Fidel Orendain

Martin Fidel Orendain

Deals and Corporate Finance Associate, PwC Philippines

Tel: +63 (2) 8845 2728