PCC adjusts anew M&A thresholds for scrutiny

To reflect the country’s growing economy, the Philippine Competition Commission (PCC) raised for the second time the thresholds of deals that will need to undergo compulsory review.

Starting March 1, the country’s antitrust body said mergers and acquisitions (M&As) that go beyond the size of person (SoP) test worth P5.6 billion and size of transaction test worth P2.2 billion would have to get its green light.

The PCC currently uses two thresholds to filter out the M&As that have the potential to be anticompetitive.

The SoP test looks at the value of assets or revenues of the ultimate parent entity of at least one of the parties in a business deal.

There is also the SoT test, which looks at the value of assets or revenues of the acquired entity.

M&As that go beyond these thresholds have to seek a PCC review, which could end in one of three ways: a block, an approval or a conditional approval.

The PCC said these new rules do not apply to M&As already pending for review, notifiable transactions consummated before March 1, and transactions already subject to a PCC ruling.

This marks the second year that the thresholds have been raised, following a 2018 memorandum circular that set an automatic adjustment for every year.

Back in 2015, both the thresholds were set at only P1 billion. Last year, the SoP was raised to P5 billion and the SoT at P2 billion.

The adjustments are based on the country’s economic growth for the previous year, particularly its nominal gross domestic product (GDP).

In this case, PCC said the nominal GDP growth in 2018 stood at 10.23 percent, citing the official estimates of the Philippine Statistics Authority.

PCC Chairman Arsenio M. Balisacan noted the appetite for M&As remained high in a growing economy.

“The adjustment based on nominal GDP growth ensures that the thresholds maintain their real value over time and relative to the size of the economy,” he said.

To date, the PCC has received a total of 177 transactions and approved 161 of them amounting to a combined value of P2.83 trillion.

The five most active sectors remained largely unchanged from last year: manufacturing, finance and insurance, real estate, electricity and gas, and transportation and storage.