The Philippines has become fertile ground for merger and acquisition (M&A) deals despite the challenging global capital market backdrop, with foreign investors now on the prowl for opportunities in telecommunications, energy and health care, said a top Bank of America (BofA) official.
Tom Barsha, co-head of Asia-Pacific M&A at Bank of America, said in a recent interview with Inquirer that the country has bucked the downturn in M&A deal volumes in the Asia-Pacific (Apac) region.
While the total value of deals has gone down this year, the number of M&A deals has gone up, indicating that the average size of transactions is smaller than in the prior year.
“To give further context, the deal count in Apac is down by around 19 percent year to date compared to the same period last year. However, the number of deals is up 6 percent in the Philippines,” Barsha said.
In the current environment marked by heightened volatility and geopolitical tension, Barsha said deals tend to be smaller globally. For strategic investors, while many have the balance sheet to finance larger deals, he said many were also being more cautious in assessing opportunities.
Over the last 15 years, Barsha said the Philippines “has come a long way as a destination for foreign investments,” with financial investors looking at the market and “contemplating what more they could do.” The country indeed offers an “attractive” M&A ground, he said.
“Apart from the positive local demographic and economic factors I would highlight the track record of private equity firms achieving strong returns over the recent past,” Barsha said.
‘Broader group of investors’
“Looking at these past returns, a broader group of investors are taking notice of the Philippines and the opportunity it presents,” he added.
Interest is seen coming from a mix of experienced investors and new names.
“Investors with local experience are looking for new opportunities without a doubt, but there are some new names that are also looking at the Philippines,” Barsha said.
Energy transition is a theme that’s receiving considerable attention from investors, although it’s not unique to the Philippines, he said.
Telecom infrastructure is also seen as an active sector that continues to see strong investor interest, along with health care, given the gaps that the recent pandemic had brought attention to.
Asked about the impact of global headwinds, particularly the Russia-Ukraine war and the more recent conflict in Israel, Barsha said broader macroeconomic factors and market volatility indeed influence boardroom confidence.
The country is facing similar challenges as other countries in the M&A scene, he said. “However, the Philippines offers an interesting opportunity to investors and over time, I’m confident we will see strong growth in M&A activity in the country,” he said. INQ