Private Equity 2025 Comparisons

There has been a notable rise in Environmental, Social, and Governance (ESG)-driven investments in the Philippines over the past 12 months. In particular, it has been reported that large private equity deals have been concentrated in the infrastructure and energy sectors. Specifically, the renewable energy sector has attracted significant investments from private equity firms, foreign energy companies and local conglomerates, with several acquisitions and large-scale investments in renewable energy plants taking place.

These investors have expanded their portfolios to include clean energy assets, driven by both regulatory incentives and growing market demand for sustainable solutions. The sector has seen a flurry of activity, including strategic acquisitions, joint ventures, and large-scale capital investments into solar, wind, and hydroelectric projects.

This investment momentum is not only reshaping the country’s energy landscape but also positioning the Philippines as a rising player in the regional green energy market. The government’s push for energy transition, coupled with favourable policy frameworks such as the Renewable Energy Act and Green Energy Auction Program, has created a conducive environment for ESG-aligned capital flows.

For investors, this presents a compelling opportunity. Renewable energy assets in the Philippines offer attractive returns, long-term growth potential, and alignment with global ESG mandates. As the country continues to decarbonise its energy mix and build climate resilience, early movers in the space stand to benefit from both financial upside and reputational gains.

Private equity transactions in 2025 have favoured a very wide variety of sectors and industries. With the global trend on sustainability and decarbonisation, there has been a growing interest in renewable energy and clean energy projects. Moreover, there have been recent deals in fintech, data centres, telecommunications and tower infrastructure sectors, healthcare, cold storage logistics, and consumer retail involving private equity funds.

Despite ongoing geopolitical tensions in the Asian region related to the Philippines’ territorial disputes with China, private equity investment activities have remained resilient. The Philippines continues to attract private equity investors, especially in the energy and infrastructure sectors, which have accounted for the majority of large transactions in the past year. Local acquisition financing remains accessible, supported by ample domestic liquidity and competitive interest rates, helping facilitate deal execution. However, it has been reported that the number and size of IPOs in the Philippines remain low compared to the country’s neighbouring and international peers, so there is unpredictability on IPOs as a liquidity event for private equity.

Sustainable Finance

The Securities and Exchange Commission of the Philippines (SEC) has been active in exercising its regulatory power to promote sustainable finance in the country. On top of its existing rules and regulations on sustainable debt instruments, such as circulars on green bonds, sustainability bonds, sustainability-linked bonds and blue bonds, the SEC very recently issued Memorandum Circular No 13, series of 2025, introducing the Philippine Green Equity Guidelines. These guidelines – touted to be the first of their kind in Southeast Asia – seek to create a framework for companies to align their equity offerings with environmentally sustainable finance objectives, thereby allowing the investing public to support sustainable enterprises. In particular, the guidelines aim to highlight corporations engaged in “Green Activities” or those classified as green under the Philippine Sustainable Finance Taxonomy Guidelines (STFG) or the Association of Southeast Nations (ASEAN) Taxonomy for Sustainable Finance (ATSF). These projects mainly fulfil environmental objectives such as addressing climate change, protecting ecosystems, or promoting resource resilience. Examples include renewable energy generation, pollution control, sustainable agriculture, and water supply. Issuers may qualify and apply for a Green Equity Label if: (i) more than 50% of revenue is derived from sustainable economic activities called Green Activities; (ii) more than 50% of investments are channelled towards Green Activities; (iii) less than 5% of revenues are derived from fossil fuels; and (iv) company activities meet the eligibility criteria of the Philippine Sustainable Finance Taxonomy Guidelines or the ASEAN Taxonomy for Sustainable Finance.

While it is too early to determine the impact of this new circular and other more recent regulations of the SEC on private equity deals in the Philippines, it is expected that these will highlight the country’s growing appeal as a credible and transparent destination for sustainable investments.

Updated Notification Thresholds for Compulsory Notification of Transactions

The thresholds for compulsory notification of mergers and acquisitions under the Philippine Competition Act have been adjusted pursuant to Philippine Competition Commission (PCC) Resolution No 04-2025. The current thresholds are as follows.

• Size of Party: aggregate annual gross revenues in, into, or from the Philippines, or value of the assets in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities exceed PHP8.5 billion (approximately USD144.24 million or EUR124.52 million).
• Size of Transaction: the value of the transaction exceeds PHP3.5 billion (approximately USD59.40 million or EUR51.27 million).

Transactions that meet or exceed both thresholds are required to be notified to the PCC and must secure clearance prior to completion of the proposed transaction. The thresholds are reviewed annually by the PCC to account for changes in market and current economic condition.

Amendments to Tax Law

Republic Act No 12214 or the Capital Markets Efficiency Promotion Act (CMEPA) amended the Philippines’ Tax Code to promote the development and tax competitiveness of the Philippine capital markets, among other purposes. Pursuant to the CMEPA, a 15% capital gains tax applies to the sale or disposition of shares in both domestic and foreign corporations that are not traded on the stock exchange. On the other hand, stock transaction tax was decreased to 0.1% of the gross selling price or gross value of the sale or disposition of shares of shares listed on the local stock exchange, ie, the Philippine Stock Exchange (PSE). Cash and property dividends from a domestic corporation or from a joint stock company, insurance, or mutual fund company are generally subject to a 10% final tax, which is increased to 20% and 25% for non-resident aliens engaged in trade or business and those who are not so engaged, respectively. Documentary stamp tax on original share issuance was also reduced to 0.75% of par value.

New Definition of Public Utility

Republic Act No 11659 or the amended Public Service Act, which amends the definition of “public utility”, is proving to be impactful in the context of investments in the Philippines. The law redefines public utility, narrowing its scope and liberalising foreign equity restrictions across various sectors that were previously considered off limits to foreign investors. Under the amendment, public utility is a public service that operates, manages, or controls for public use the distribution of electricity; transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; seaports; public utility vehicles; and other services classified as such by Philippine Congress. The law also defines “critical infrastructure” as any public service which owns, uses, or operates systems and assets so vital to the Philippines that their incapacity or destruction detrimentally impact national security.

Notably, in light of a narrower list of public utilities, 100% foreign investment is now allowed in other public services such as transportation and telecommunications, subject to limitations to safeguard national security. For instance, the Philippine President may suspend or terminate any proposed merger, acquisition, or investment in a public service that results in the grant of control, whether direct or indirect, to a foreigner or a foreign corporation, upon review and recommendation of the concerned department or government agency. Moreover, entities controlled by or acting on behalf of foreign governments or foreign state-owned enterprises cannot own capital in public utilities or critical infrastructure. Foreign nationals also cannot own more than 50% of the capital of entities operating and managing critical infrastructure unless reciprocity is accorded by their state to Philippine nationals.

Lease of Private Lands by Foreign Investors

Republic Act No 12252 amends Republic Act No 7652, also known as the Investors’ Lease Act, and liberalises the long-term lease of private lands by foreign investors. One of its key provisions increases the allowable lease period from a maximum period of 75 years to 99 years. This extended lease period may be shortened at the discretion of the President of the Republic of the Philippines, particularly for projects involving vital services or industries classified as critical infrastructure. This development enhances the attractiveness of the Philippines to private equity investors, especially those pursuing long-term, land-intensive projects.

Green Lanes for Strategic Investments

Executive Order No 18, Series of 2023, requires local government units and administrative agencies to set up a “Green Lane” to expedite and streamline the issuance of permits and licences for “Strategic Investments.” These investments include those recommended by the Fiscal Incentives Review Board, foreign direct investments resulting from the Foreign Investment Promotion Marketing Plan, activities in priority sectors under the Strategic Investment Priorities Plan, and other investments aligned with the Philippine Development Plan.

Key regulators relevant to private equity are as follows.

Securities and Exchange Commission (SEC)

The SEC is the agency primarily vested with jurisdiction over all domestic corporations and foreign corporations with licence to do business in the Philippines. It also regulates the Philippine securities market, including self-regulatory organisations in the capital markets such as the PSE. It formulates policies and recommendations concerning domestic corporations and securities (such as shares of stock and bonds) and exercises enforcement powers in case of violations of the laws that it seeks to implement and its rules and regulations.

Bureau of Internal Revenue (BIR)

The BIR is the primary tax authority of the Philippines. Tax obligations or assessments arising from private equity transactions must be reported and paid to the BIR.

Philippine Competition Commission (PCC)

The PCC is the principal regulatory body that implements Philippine competition policy and enforces competition laws. PCC notification and approval are required for private equity transactions that breach specific thresholds based on the Size of Party and Size of Transaction.

Investment Promotion Agencies: Board of Investments (BOI) and Economic Zone Authorities

The BOI promotes, regulates, and develops investments in the Philippines. Certain investments may require endorsement from the BOI. Meanwhile, the Economic Zone Authorities oversee ecozones, industrial estates, export processing zones, free trade zones, and similar to promote domestic and foreign investment. If an entity engages in activities that are part of the Investment Priorities Plan, it may register with the BOI or an Economic Zone Authority to enjoy incentives such as an income tax holiday.

Bangko Sentral ng Pilipinas (BSP)

The BSP is the central monetary authority of the Philippines and is tasked with regulating foreign exchange transactions. BSP has promulgated regulations on registration of foreign direct investments and foreign portfolio investments of non-resident investors to allow such investors to source foreign currency from within the Philippine banking system in exchange for the Philippine peso returns on or proceeds of sale of their investments. 

Key Regulatory Issues

Foreign shareholding restrictions for nationalised activities, which may be found in the Philippines’ 12th Regular Foreign Investment Negative List, remain a key regulatory issue in private equity transactions in the Philippines. The negative list is updated from time to time.

As of 12 April 2022, the date on which Republic Act No 11659 or the amended Public Service Act became effective, investments of entities controlled by or acting on behalf of the foreign government, or foreign state-owned enterprises in any public service classified as a public utility or critical infrastructure (as defined under the law) are prohibited. Foreign state-owned enterprises with existing investments prior to April 2022 are prohibited from investing in additional capital. Nevertheless, the sovereign wealth funds and independent pension funds of each state may collectively own up to 30% of the capital of public services.

The EU FSR regime does not appear to be particularly relevant for transactions in the Philippines. There has been no change in law or practice in the approach to anti-bribery and sanctions, but new regulations aim for robust ESG compliance.

Legal due diligence is typically conducted by an appointed external counsel of the potential buyer and is performed through a review of documents made available in a virtual data room supplemented by management session or interview. In practice, buyers request a red flags report which highlights key legal risks and issues that may affect the transaction. The scope of legal due diligence generally covers the following areas:

• corporate matters, including organisational structure, incorporation documents, and shareholdings;
• regulatory permits and approvals material to the business operation;
• material agreements;
• material property ownership, leases and encumbrances;
• intellectual property ownership, registrations, and infringement issues;
• employment matters; and
• litigation.

In addition to these standard areas, focus on business-specific legal issues may also be reviewed, depending on the buyer’s priorities and the nature of the target company’s operations.

Vendor due diligence is typically conducted in transactions involving competitive bidding or auction sale. However, where vendor due diligence is performed and a vendor due diligence report is provided by the seller, the potential buyer will usually still conduct its own independent legal review to either validate findings by the vendor’s external counsel and assess risks from its own perspective or check areas or documents not covered by vendor due diligence, or both.

Sell-side legal advisers generally do not provide reliance on vendor due diligence reports. Instead, they may consent to the distribution of the report on a non-reliance basis, subject to the buyer executing a non-reliance letter, which confirms that the buyer acknowledges the scope and limitations of the report.

Acquisitions are typically documented through privately negotiated sale and purchase agreements, including those involving private equity funds. In transactions conducted through an auction process, the draft agreement initially contains limited warranties and seller obligations compared to those in privately negotiated deals. An auction sale process is structured where the seller sets the terms of the transaction in advance and expects bidders to accept them with minimal negotiation. Bidders are typically expected to accept these terms as they are and reflect any risks or limitations in their bid price. The seller typically maintains control over the process and expects that there will be no material deviations from the standard auction terms.

However, there are still many deals where the buyers are able to negotiate certain provisions of the transaction documents during the exclusivity period, which pertains to an agreed timeframe within which the seller agrees to negotiate solely with the highest bidder.

In private equity-backed acquisitions, the buyer is typically a special purpose vehicle (SPV) designated by the private equity fund. The SPV is usually formed specifically to carry out the transaction and hold the investment.

While the SPV is the contracting party, the private equity fund itself may assume certain obligations, most commonly in the form of guarantees for the SPV’s payment or performance obligations. These guarantees are often limited in scope and duration and are structured to protect the fund from broader liability exposure.

There are a number of acquisitions where financing is obtained concurrently with the closing of the acquisition. In such cases, the acquired shares are often used as collateral to secure the financing. Hence, certain steps are taken simultaneously at closing of the acquisition to satisfy both the acquisition and financing requirements and conditions. Notably, however, in some transactions, while financing is obtained, it is not a condition precedent to the closing of the acquisition and, in these instances, the private equity-backed buyer may initially fund the purchase price through internal resources. The external financing is then used post-closing to refinance the acquisition cost.

In recent years, there has been ample domestic liquidity allowing large domestic banks to provide acquisition financing.

A consortium of private equity firms investing in a local entity is not uncommon. A common structure features a lead private equity fund acquiring a majority stake in the local entity, while other private equity firms participate as minority investors. Notably, these partnerships tend to be formed between private equity firms, rather than between a private equity firm and a corporate investor.

In most M&A transactions, private equity firms usually enter as external co-investors, rather than joining as partners of an existing private equity firm shareholder in the local entity.

While fixed-price locked-box mechanisms are used in certain transactions, they remain less common in M&A transactions. More frequently, parties adopt a completion accounts structure, where the purchase price is subject to post-closing adjustments based on financial metrics, such as working capital, cash, and debt determined as of the closing date.

In transactions involving private equity funds, the consideration structure tends to be more elaborate and commercially negotiated. Private equity buyers often seek mechanisms with detailed adjustment formulas.

By contrast, corporate buyers or sellers typically agree on a fixed consideration based on a valuation of the shares, with fewer post-closing adjustments. The choice of consideration structure is influenced by the level of diligence and financial transparency available at the time of signing.

Where a fixed-price locked-box consideration structure is adopted, interest is not commonly charged on equity price or on any leakage occurring during the locked-box period.

Where purchase price adjustments have been agreed upon, it is standard practice to include a dedicated dispute resolution mechanism within the share purchase agreement. This mechanism is designed to address any disagreements that may arise in relation to the calculation or interpretation of the consideration structure. Typically, the parties will first attempt to resolve such disputes amicably through negotiation. If a resolution cannot be reached within a specified timeframe, the matter is usually referred to an independent expert, often a reputable accounting firm jointly appointed by the parties. The expert’s determination is generally final and binding, providing a streamlined and efficient alternative to formal litigation or arbitration.

M&A deals typically have a high level of conditionality, depending on the buyer’s level of comfort following due diligence. The conditions will depend on the key risks identified, which the buyer would require to be addressed before closing of the transaction. These conditions also depend to a large degree on the nature of the target company’s business, which may require a number of legal requirements to be complied with in order to complete the acquisition.

Material adverse change/effect provisions, which allow the buyer to walk away if significant negative changes occur in the target’s business, financial conditions, or operations between signing and closing, are commonly set down in the agreement. Third-party consents, such as regulatory approvals, consents from counterparties to material contracts, or shareholder consents, where required, are often conditions precedent to closing of the transaction.

“Hell or high water” undertakings are not common in M&A transactions in the Philippines. In rare instances where they are agreed, this is only usually with respect to merger control approvals. Where parties agree on a hell or high water undertaking, they are either certain at the outset that conditions will be imposed by the competition authority or confident enough that the transaction will not pose competition concerns. Outside of merger control contexts, such commitments are rare due to the significant risk and lack of flexibility they impose on the buyer. Most buyers prefer to retain the ability to walk away from the transaction if regulatory or third-party approvals cannot be obtained on acceptable terms.

While not typical in Philippine M&A, break or termination fees may be included in agreements where the buyer refuses to close the transaction, despite the seller having fulfilled all conditions precedent to closing. The fees serve as a form of liquidated damages, compensating the seller for the time, effort, and opportunity cost incurred in pursuing the transaction. In such cases, the break fee is typically a fixed amount, agreed upon during negotiations and documented in the share purchase agreement.

Private equity sellers or buyers may typically terminate the acquisition agreement if there is a material breach of any of the agreement’s terms and conditions, usually subject to a curing period or in the event of any material adverse change between signing and closing. A typical long-stop date ranges from six months to one year from the date of signing of the definitive agreement. The long-stop date may be extendible by agreement of the parties, particularly in transactions where regulatory approvals or other government actions are required as part of the closing conditions. The duration and flexibility of the long-stop date are often tailored to the complexity of the transaction and the anticipated timeline for satisfying key conditions, such as merger control clearance, foreign investment approvals, or third-party consents.

There does not appear to be any significant difference in risk allocation between transactions involving private equity-backed parties and those involving corporate buyers or sellers. In general, the allocation of risk tends to be driven more by the specifics of the transaction and the negotiating leverage of the parties than by the nature of the investor.

However, limited indemnity structures are more commonly accepted by buyers in transactions where the parties agree to procure warranty and indemnity (W&I) insurance. In such cases, the seller’s liability for breaches of representations and warranties is significantly reduced or capped, with the insurance policy stepping in to cover potential losses.

Under a typical share purchase transaction, sellers provide a wide range of warranties, including fundamental warranties (eg, title to shares, corporate authorisation), tax warranties, and business warranties relating to operations and compliance with regulations. The scope of the warranties and the corresponding indemnities for breaches are subject to negotiation, and depend largely on the buyer’s due diligence findings. The liability caps and time limits are likewise determined based on the level of risks identified during the due diligence.

The following are the usual time limits and limits on liability for breaches, involving private equity buyer:

• indemnification for breach of fundamental warranties is up to 100% of the purchase price, with a limitation of up to five to seven years after closing;
• tax claims are subject to statutory period of limitation and indemnification is based on actual amount of claims; and
• business-specific warranties are subject to a three-year time limit and indemnification based on a fixed amount or percentage of purchase price and subject to minimum and aggregate claims.

Buyers generally do not accept data-room disclosure as disclosure against the warranties, and require specific disclosures contained in disclosure letters or schedules to the share purchase agreement.

Warranty and indemnity insurance have become increasingly common in private equity deals, especially when private equity funds are involved in the transaction. This enables the parties to agree on limited indemnification obligations on certain warranties covered by the W&I insurance. W&I insurance typically covers business warranties, while tax matters are often carved out.

On the other hand, escrow or retention mechanisms are common in transactions where adjustments to the purchase price have been agreed. Furthermore, in some cases, parties agree to hold back a portion of the purchase price to address high-risk exposures or contingent liabilities identified during due diligence.

Arbitration is the preferred dispute resolution mechanism in cross-border transactions, such as where the private equity investor is a foreign entity. This is often agreed by the parties where the arbitration forum is a neutral forum and with ease of enforceability of awards as compared to court litigations. In the Philippines, arbitration is often chosen over court litigation due to the protracted and unpredictable nature of judicial proceedings, which can significantly delay resolution and increase costs.

Even as instances of voluntary delisting from the local stock exchange have increased in recent years, they do not typically involve “public to privates” with private equity-backed bidders. However, therehave been M&A deals where the acquisition of a substantial interest by an investor has eventually resulted in the delisting of the target company. This delisting was likely a commercial decision made by the parties, particularly where the regulatory tender offer triggered by the M&A had resulted in the public float of the target company falling below the minimum public ownership requirement being enforced by the local exchange, ie, the PSE.

Private equity funds, which generally seek to exit investments within a defined time frame, may find public companies more attractive due to the relative ease of exit through capital markets. In fact, for private target companies, transaction documents would typically provide for an IPO as the private equity investor exit mechanism.

In a voluntary delisting from the PSE, the listed company must be able to comply with the following requirements, among others:

• the delisting must be approved by two-thirds of the entire membership of the board of directors, including the majority, but not less than two, of all of its independent directors;
• the delisting must be approved by the stockholders owning at least two-thirds of the total outstanding and listed shares; further, the number of votes cast against the delisting proposal should not be more than 10% of the total outstanding and listed shares of the listed company; and 
• all security holders must be notified, in the manner and within the period provided in the company’s by-laws, of the meeting at which the proposed delisting will be submitted for shareholder approval.

A tender offer to all stockholders of record must also be made. The tender offeror (eg, the substantial stockholder or even the listed company itself) must submit a fairness opinion or valuation report, stating the fair value or range of fair values of the listed security, based upon certain procedures followed and assumptions made. The minimum tender offer price should be the higher of:

• the highest valuation based on the fairness opinion or valuation report prepared by an independent valuation provider in accordance with the relevant regulations; or
• the volume weighted average price of the listed security for one year immediately preceding the date of posting of the disclosure of the approval by the company’s board of directors of the company’s delisting from the PSE.

The person proposing the delisting must show to the PSE that, following the acquisition of the tendered shares, they have obtained a total of at least 95% of the issued and outstanding shares of the listed company. However, if, at the time the petition for delisting is filed, the person proposing the delisting is already the beneficial owner of 95% or more of the issued and outstanding shares of the listed company, they will still be required to make a tender offer to all other stockholders of record.

Relationship agreements and transaction agreements between bidder and non-listed target are common in M&A transactions, although such transaction agreements may be subject to renegotiation once it has become a public company.

Any person who acquires, directly or indirectly, at least 5% beneficial ownership of any class of equity securities of a public company or a company whose securities are registered with the SEC must submit a beneficial ownership disclosure to the company, the PSE and any other local exchange where the securities of the public company are listed, and to the SEC within five days after acquisition. Meanwhile, any person who, directly or indirectly, is the beneficial owner of at least 10% of any class of any equity security of a public company or a company whose securities are registered with the SEC must submit a beneficial ownership disclosure within ten days (or, as applicable, five days) from the date of the acquisition of such ownership. Any change in the 10% beneficial ownership during the month should likewise be disclosed within ten days after the close of each calendar month.

Moreover, public companies must file quarterly public ownership reports with the SEC detailing substantial stockholders, shares subject to lock up, publicly held shares, and other related information.

The SEC also requires corporations and entities within its jurisdiction to disclose their beneficial owners in their General Information Sheet (GIS), which is generally filed on an annual basis. A natural person who owns directly or indirectly at least 25% of the voting rights of a corporation is deemed to be a beneficial owner for purposes of this beneficial ownership disclosure. In addition, the SEC requires nominee shareholders as well as nominee directors of registered corporations to disclose to the SEC their nominators and principals or persons on whose behalf they act as such shareholders/directors.

For private equity-backed bidders contemplating or required to conduct a tender offer in the Philippines, the bidder must file with the SEC a tender offer report containing information on, among other things: (i) the identity of the bidder; (ii) the identity of the target listed company; (iii) the securities subject to the tender offer; (iv) the purpose and terms of the tender offer (including the expiration date of the tender offer and the manner and date of withdrawal of the securities); and (v) the confirmation from the offeror’s financial adviser or another appropriate third party that the resources available to the offeror are sufficient to satisfy full acceptance of the offer, among others. 

The report must be delivered to the target company and to each exchange on which the securities are listed. The tender offer must also be published in at least two newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two consecutive days thereafter. Tender offer reports are also distributed to the securities’ brokers and certificated stockholders. Upon completion of the tender offer, the bidder must file a report to the SEC and the PSE on the results.

The following will trigger the requirement to conduct the mandatory tender offer:

• the intention to acquire at least 35% of outstanding voting shares, or the outstanding voting shares that are sufficient to gain control of the board of directors of a public company, in one or more transactions within 12 months;
• the intention to acquire at least 35% of outstanding voting shares, or the outstanding voting shares that are sufficient to gain control of the board of directors of a public company, directly from one or more stockholders; 
• the intention to acquire the amount of outstanding equity securities of a public company that will result in acquiring over 50% of the total outstanding equity securities thereof; or
• the intention to acquire only (at least) 15% equity securities in a public company in one or more transactions within 12 months, which will give rise to the obligation to file a declaration with the SEC.

The mandatory tender offer requirement is triggered where any person or group of persons acting in concert intends to acquire the number of shares that will result in shareholdings reaching any of the above percentages. While the law and regulations do not provide for a definition of “acting in concert”, attribution of target shares held by affiliated or related funds or portfolio companies may be necessary, especially where there is common beneficial ownership of the shares held by such affiliated or related funds or portfolio companies.

Cash is more commonly used as consideration in the Philippines.

The pricing of securities is usually based on valuations conducted by SEC-accredited firms. For mandatory tender offers, these firms issue fairness opinions providing for a range of prices based on various valuation methodologies and material assumptions, among others.

If any person varies the terms of a tender offer before it expires by increasing the consideration offered to holders of such securities, this person should pay the increased consideration to each security holder whose securities are taken up and paid for, whether or not the securities have been taken up by the person before the variation of the tender offer.

In a mandatory tender offer, the offeror must offer the highest price paid by them for the securities during the preceding six months. If the offer involves payment by transfer or allotment of securities, the securities must be valued on an equitable basis.

A bidder may impose takeover offer conditions and a selling shareholder where secondary shares are being sold or the target company where new shares will be issued for new investment may accept such conditions. Neither the law nor the regulator restricts the use of offer conditions provided that they do not run contrary to law, morals, good customs, public order or public policy.

A standard condition for an offer that will result in the bidder gaining control is the conduct and completion of the mandatory tender offer to the minority shareholders. The tender offer should, in turn, comply with the minimum conditions required under the regulations. One of the most important conditions is that the sale of shares pursuant to the private transaction or block sale cannot be completed prior to the closing and completion of the tender offer. Another condition is that the tender offer report must include confirmation by the offeror’s financial adviser or another appropriate third party that the resources available to the offeror are sufficient to satisfy full acceptance of the offer.

Other regulatory conditions include PCC notification and approval for transactions that breach the thresholds previously discussed and approval of government agencies, where applicable.

A bidder is not prevented from seeking deal security measures from the selling shareholder where secondary shares are being sold or from the target company where new shares will be issued. Conditions such as break fees, match rights, and non-solicitation provisions may be agreed by such parties. However, force-the-vote provisions that require a Philippine counterparty to obtain only the approval by the stockholders if board approval is not obtained do not appear to be recognised in local deals, and their enforceability may even be subject to legal challenge. For one, where transaction documents have already been signed (eg, in a share purchase agreement or investment agreement), such execution is almost always supported already by a board approval. Moreover, the Revised Corporation Code provides that, unless otherwise provided in the law in question, the board of directors or trustees shall exercise the corporate powers, conduct all business, and control all properties of the corporation. Therefore, Philippine M&A transactions require affirmative board approval.

Under the Revised Corporation Code, certain matters are subject to approval of shareholders holding at least two-thirds of the total outstanding capital stock of the corporation. Hence, a bidder that owns less than 100% of the shares in a corporation may still be entitled to exercise shareholder rights where the matter is subject to a high vote requirement. Governance rights that may be exercised by holders of voting shares regardless of the percentage of ownership include voting in meetings (including the right to cast vote on the election of directors) and inspection of corporate records. Further, unless denied by the corporation’s Articles of Incorporation, shareholders also have a pre-emptive right to subscribe to all issuances or disposition of shares proportional to their shareholdings.

Debt push-down may be achieved in case of a wholly owned company but may be difficult in a situation where the target company is not wholly owned by the private equity bidder. There is no particular threshold prescribed for a debt push-down to be implemented. However, it is typically recommended that the Board of Directors of the target company should confirm existence of corporate benefit for acquiring the debt. Tax implications should also be considered.

A reverse stock-split is the most common squeeze-out mechanism adopted, especially after the company has ceased to be listed with the PSE. It is also possible for the target company to carry out another tender offer round or share buy-back subject to compliance with certain conditions, particularly in the presence of unrestricted retained earnings.

Irrevocable commitments to tender or vote by principal shareholders are not commonly used in the Philippines. Principal shareholders typically retain the flexibility to consider competing proposals until a definitive agreement has been executed, or unless an exclusivity period has been agreed. Unless the parties have entered into a binding exclusivity or lock-up agreement, the principal shareholder is generally free to entertain superior offers from third parties.

These types of undertakings are usually negotiated for purposes of the definitive transaction documents.

It is not common to provide in-transaction documents of private equity transactions in the Philippines for equity incentives to the management team. If such equity incentives are provided, they are typically provided only to top management and subject to vesting conditions.

Sweet equity or institutional strip are not common in Philippine M&A deals.

Where management equity participation incentives are granted, it is common for these to be subject to vesting schedules and leaver provisions. Leaver provisions include automatic forfeiture of unvested incentive or vested equity becoming non-exercisable or subject to repurchase, depending on whether the individual is classified as a good leaver (eg, termination without cause, retirement, disability) or a bad leaver.

Non-compete, non-solicitation, non-disparagement and confidentiality undertakings are customary restrictive covenants agreed to by management shareholders. These are generally valid and enforceable as long as they are reasonable and proportionate to the legitimate interests they seek to protect in the context of the transaction. Non-compete clauses should not be so restrictive that they infringe on an individual’s right to earn a livelihood. Reasonableness is typically assessed based on their scope, including limitations as to duration, geographic coverage, and the nature of the restricted business activities.

Minority protection rights include veto rights, non-dilution protection, rights of first refusal, and tag-along rights.

Under the Revised Corporation Code, certain corporate actions require a high vote of at least two-thirds of the outstanding capital stock. As a result, minority shareholders holding more than one-third of the total outstanding shares effectively hold statutory veto rights over these matters, including amendments to the company’s constitutional documents, mergers, and dissolution. However, for corporate actions which require a lower vote, such as majority of the outstanding capital stock, minority protection will come in the form of contractual veto rights as may be agreed by the parties.

Further, unless denied under the constitutional documents, all shareholders have a pre-emptive right to all issuances of shares as an anti-dilution protection. Veto rights over any issuance of shares are also an anti-dilution protection.

Additionally, while not statutorily mandated, the management team’s right to influence or participate in the private equity fund’s exit strategy, such as through consultation rights, vetoes over timing or structure or tag-along rights, may be negotiated commercially and documented in shareholders’ agreements.

Depending on the percentage of shares held, board representation and management participation through officer appointments (specifically, positions that have access to and control over financial matters) are typical for private equity fund shareholders with substantial investment. In the absence of a shareholders’ agreement, a shareholder, through cumulative voting, may be able to obtain board representation in the investee company in proportion to its shareholding. On the other hand, officers are elected by the board of directors. The right to nominate officers is typically agreed upon by the shareholders in a shareholders’ agreement. Private equity fund shareholders generally negotiate to have the right to nominate officers who have access to the company’s financials. Veto rights through shareholders and board reserved matters are, likewise, commonly agreed. However, these contractual rights of a foreign minority shareholder may be subject to limitations if the target is engaged in partly nationalised activities that restrict foreign equity investment or foreign participation in its corporate affairs.

Generally, shareholders, the private equity fund backing the shareholders, and the portfolio company are treated as separate entities under Philippine corporation law, so their liabilities are also separate.

However, during litigation, courts or administrative agencies may “pierce the corporate veil” and hold the directors and officers liable for the portfolio company’s actions as well. This is allowed when the corporate entity is used to perpetuate fraud or an illegal act, evade existing obligations, or circumvent law, as well as when the corporation is a mere business conduit of a person or another corporation.

Exits are typically carried out through either private sales or IPOs, with private sales being the more common route. An exit with dual or triple tracks concurrently undertaken, especially with IPO as one of the exit strategies, is uncommon in the Philippines. In most cases, parties agree to explore the possibility of an IPO at the time of exit, but where market conditions are not favourable, private sale tends to be the more frequently executed mechanism.

Drag-along and tag-along rights in shareholders’ agreements governing the target company, particularly in transactions involving private equity or strategic investors, are commonly agreed upon. These rights are typical for managing exit scenarios and protecting the interests of the relevant shareholders.

Tag-along rights allow minority shareholders to participate in a sale initiated by the majority shareholder. The scope of these rights is negotiated on a case-by-case basis, but these provisions typically entitle minority shareholders to sell either: (i) all of their shares; or (ii) a proportionate number of shares relative to those being sold by the majority shareholder. This ensures that minority shareholders are not left behind in a liquidity event, and can benefit from the same terms offered to the majority shareholder.

Drag-along rights, on the other hand, enable majority shareholders to compel minority shareholders to sell their shares in the event of a third-party acquisition. The extent of the drag is also subject to negotiation, but could also cover all shares or a proportionate number of shares relative to the shares being sold by the majority shareholder.

Institutional co-investors typically negotiate for full tag-along and drag-along covering all shares for a full exit, as compared to management investors, who may be amenable to proportionate rights. These provisions are particularly relevant in private equity-backed companies, where exit planning is a key consideration from the outset.

The following lock-up requirements apply to current shareholders of a company carrying out an IPO as a condition to the listing of shares with the PSE:

• shareholders who own at least 10% of its issued and outstanding shares are subject to a lock-up period of 180 days after the listing of the shares if the company meets the track record requirements under PSE rules, or 365 days after the listing of the shares if the company is exempt from the track record and operating history requirements under PSE rules; and
• shares issued or transferred to any shareholder and fully paid for within 180 days before the start of the IPO or the listing date, as the case may be, and which were acquired at the transaction price that is lower than the IPO offer price or the listing price, are subject to a lock-up period of 365 days from the full payment of the shares.

However, the second lock-up requirement set out above (ie, applying to shares issued or transferred within 180 days) is not applicable to shares issued to alternative investment funds or their investment vehicle with a demonstrated track record in private equity investments, even if the conditions are met, provided that: (i) the shares are issued pursuant to an exercise of rights granted under convertible securities, warrants, options or similar instruments that have been held and fully paid for by the alternative investment fund or its investment vehicle for a continuous period of 365 days prior to the IPO (Holding Period); (ii) the fund or its investment vehicle is entitled to convert its holdings or subscribe to the underlying shares during the entire Holding Period; and (iii) the fund or its investment vehicle sells the exempted shares during the IPO. However, shares held by the alternative investment fund or its investment vehicle which are covered by this exemption but are not sold during the IPO should be locked up for 365 days from full payment of the shares.

An alternative investment fund is any vehicle established for the purpose of raising capital from different investors and investing the pooled funds in alternative investments such as private equity, venture capital and real assets.

Underwriters may also require contractual lock-up in their underwriting agreement with the target company or selling shareholders.