4

MODULE:___

MODULE G ALS

• To understand, analyze
and explain the concept
of Mergers and
Acquisitions
• To explain the motives of
Merger and Acquisitions
MERGERS AND
• Legal and Regulatory
aspects of Mergers and
Acquisitions
ACQUISITIONS

PREPARED BY: MR. DAN JEWARD C. RUBIS, MBA

OBJECTIVES
CTI
 OBJECTIVES
To understand, analyze
Legal and Regulatory
and explain the concept To explain the motives of
aspects of Mergers and
of Mergers and Merger and Acquisitions
Acquisitions
Acquisitions
WHAT ARE MERGERS &
ACQUISITIONS (M&A)?
 MERGERS & ACQUISITIONS (M&A)
Mergers and acquisitions (M&A)
refer to transactions between two
companies combining in some
form. Although mergers and
acquisitions (M&A) are used
interchangeably, they come with
different legal meanings.
 MERGERS & ACQUISITIONS (M&A)

These are two different ways

companies are combined. Entire
companies or their major business
assets are consolidated through
financial transactions between two
or more companies.
 MERGER
TWO COMPANIES OF SIMILAR SIZE COMBINE
TO FORM A NEW SINGLE ENTITY.
 MERGER

In a merger, two or more organizations join forces to

become a new business, usually with a new name. Because
the companies involved are typically of similar size and
stature, the term "merger of equals" is sometimes used.

A+B=C
 MERGER

• A MERGER IS AN AGREEMENT THAT UNITES TWO OR MORE

EXISTING COMPANIES INTO ONE NEW COMPANY

• MERGERS ARE A WAY FOR COMPANIES TO EXPAND THEIR REACH,

EXPAND INTO NEW SEGMENTS, OR GAIN MARKET SHARE

• A MERGER IS THE VOLUNTARY FUSION OF TWO COMPANIES ON

BROADLY EQUAL TERMS INTO ONE NEW LEGAL ENTITY
 Price Waterhouse and Coopers & Lybrand The Exxon and Mobil merger in 1999 created
were two major global accounting firms that ExxonMobil, one of the world's largest oil and gas
merged in 1998 to form companies, a historic $73.7 billion deal that
PricewaterhouseCoopers (PwC), one of the combined two Standard Oil successors to form a
current "Big Four" professional services dominant global player, enhancing their
networks, offering audit, tax, and advisory competitive edge through cost savings and
services. operational efficiencies in a volatile energy
market
Negros Navigation (NENACO) acquired Aboitiz Transport System (ATS) in
2010, merging their passenger and cargo operations
 ACQUISITION
IN AN ACQUISITION, ON THE OTHER HAND, ONE COMPANY
BUYS ANOTHER AND TRANSFERS OWNERSHIP.
 ACQUISITION

ONE BUSINESS BUYS A SECOND AND GENERALLY SMALLER

COMPANY WHICH MAY BE ABSORBED INTO THE PARENT
ORGANIZATION OR RUN AS A SUBSIDIARY.

A + B =A
 ACQUISITION

YOU CAN DO TWO KINDS OF ACQUISITIONS

STOCK SALE ASSET SALE

STOCK SALE
STOCK SALE
 STOCK SALE
A stock sale is where the buyer purchases the majority or the entire
business entity and everything that comes with it, including assets
and liabilities. Legally, the business still owns the assets and
liabilities, but the buyer is the business's new owner.
 STOCK SALE
A stock sale is where the buyer purchases the majority or the entire
business entity and everything that comes with it, including assets
and liabilities. Legally, the business still owns the assets and
liabilities, but the buyer is the business's new owner.
ASSET SALE
ASSET SALE
The acquisition
of Uber's
Southeast Asia
business by Grab
was structured
as an asset
acquisition. Grab
acquired Uber's
physical assets,
operations, and
driver contracts
in the region.
ASSET SALE
 ASSET SALE
In asset sale is where the buyer purchases a particular asset of the
target business, such as a piece of equipment or intellectual
property. In some instances, companies even sell an entire business
segment which is called a divestiture or a corporate carve-out.
A DIVESTITURE is the broad term for selling off a business unit or
asset, while a CORPORATE CARVE-OUT is a specific type of divestiture
where a parent company separates a subsidiary into an independent
entity, often via an IPO, creating a new public company but retaining
some ownership, generating cash, and unlocking value by letting the
market value the specialized unit separately.

Essentially, a carve-out is a partial divestiture designed to create a

standalone, publicly traded business from a non-core part of the
parent company, unlike a full sale where the unit is completely gone.
Is it possible for a merged entity
to keep the name of one of the
companies?
In a merger, the new entity can retain the name of one of
the original companies. While mergers are often
associated with creating a new, combined entity, retaining
the name of the stronger or more recognized company is
a very common strategic choice.

This approach is not exclusive to acquisitions.

In 2013, Tycoon Lucio Tan’s banking arms Philippine National Bank and Allied
Banking Corp. have executed a much-awaited merger.

All issued and outstanding shares of Allied Bank were converted to PNB
shares, solidifying PNB's position in the banking sector.
OF MERGERS AND
ACQUISITION
VARIETIES OF MERGERS AND ACQUISITION
HORIZONTAL
Two companies that are in direct competition and share
the same product lines and markets.

In 2013, Tycoon Lucio Tan’s banking arms Philippine National Bank

and Allied Banking Corp. have executed a much-awaited merger
HORIZONTAL
Both entities operate in the payments and financial market infrastructure sector in the Philippines:
• BancNet – electronic payment network and clearing switch operator for InstaPay and ATM/online interbank
transactions
• PCHC – payment system service provider and clearing house for checks and PESONet interbank fund transfers

Both performs similar core functions within the same industry: interbank clearing and payment processing
 VARIETIES OF MERGERS AND ACQUISITION

HORIZONTAL
REDUCED MARKET COMPETITION

A greater market share allows the combined entity to have

more influence on price formation, supply chains, and
customer loyalty.
 VARIETIES OF MERGERS AND ACQUISITION
VERTICAL
A vertical merger happens when two businesses that work at different
steps of the same process join together. Think of a cone supplier
merging with an ice cream maker.

In 2002, Ebay, a prominent online auction and shopping website, acquired PayPal, a
company that supports online payments and money transfers. Although both businesses
provided different services, PayPal was used for a growing number of transactions on
Ebay and therefore very relevant to their operations
 VERTICAL

SMC gained control of La Tondeña (Ginebra's predecessor) in the mid-1980s,

renaming it Ginebra San Miguel, Inc. (GSMI). SMC produces raw materials (bottles,
packaging, logistics) and distributes alcoholic beverages through Ginebra.
 VARIETIES OF MERGERS AND ACQUISITION
VERTICAL
COST REDUCTION

Merging with suppliers or distributors helps companies

optimize supply chains, production, and distribution
processes. Owning more of the process helps lower
production costs.
 VARIETIES OF MERGERS AND ACQUISITION
MARKET-EXTENSION
Two companies that sell the same products in different markets.

In 2017, Securities and Exchange Commission has approved the proposal

from the Banco Dipolog, Inc., the Rural Bank of Nagcarlan, Inc. and Rural
Bank of Kabasalan, Inc. to merge into one entity.
MARKET-EXTENSION

BDO acquired One Network Bank,

which had strong presence in
Mindanao, while BDO was more
concentrated in Luzon and NCR.
 VARIETIES OF MERGERS AND ACQUISITION
MARKET-EXTENSION
Geographical expansion
Market extension mergers allow companies to target new audiences and expand
their global footprint.

Faster market penetration

Expansion mergers help companies enter new markets quickly and leverage the
acquired companies’ distribution networks, supply chains, and branding.

Reduced competition
Joining forces with a similar company in a different region helps to concentrate
market power and reduce competition.
Coca-Cola FEMSA was already producing and distributing
Coca-Cola beverages in Latin America. By acquiring
CCBPI, FEMSA entered a new geographic market—the
Philippines—while selling the same core products (soft
drinks and beverages). There was no fundamental
change in product offering, only geographic expansion
Jollibee and Smashburger both operate
in the quick-service / burger restaurant
market. By acquiring Smashburger,
Jollibee expanded geographically into the
U.S. mainstream fast-food market,
offering the same core product category
(burgers) to a different consumer base.
VARIETIES OF MERGERS AND ACQUISITION
PRODUCT-EXTENSION
Two companies selling different but related products in
the same market.
Hewlett Packard Enterprise (HPE) announced the $14 billion acquisition of Juniper Networks in January 2024. While
HPE offers many networking solutions, including routers and cloud management software, it also benefits from
Juniper Networks’ AI networking solutions. Both companies cater to enterprises, data centers, and cloud providers.
This deal bolsters HPE’s product portfolio with Juniper’s innovative solutions.
VARIETIES OF MERGERS AND ACQUISITION
PRODUCT-EXTENSION
Two companies selling different but related products in
the same market.

• Extending products and services

• Creating cross-selling opportunities
• Expanding a customer base
• Improving market share
VARIETIES OF MERGERS AND ACQUISITION
CONGLOMERATION
Two companies that have no common business areas.

SM Investments said Friday it acquired stakes in

2GO Group Inc, marking its entry into the
logistics space.
CENTURY PACIFIC Group, Inc. and JE Holdings Inc. have increased their stakes in listed restaurant operator Shakey’s Pizza Asia Ventures,
Inc. after buying out shares that were previously held by Arran Investment Pte. Ltd.

In a stock exchange disclosure on Monday, Shakey’s said Century Pacific and JE Holdings bought the stake of Singapore’s sovereign
wealth fund GIC Pte. Ltd., through affiliate Arran Investment, under a private placement scheme.

Century Pacific and JE Holdings are the private holding firms of the Po and Gokongwei families, respectively.

As part of the transaction, Century Pacific bought 185 million shares, increasing its stake in the operator of casual dining restaurants to
62%, while JE Holdings purchased 98 million shares, hiking its stake to 14.9%. The shares were bought at P9.50 apiece.

GIC previously held 283 million shares, accounting for a 16.8% stake in Shakey’s.
 VARIETIES OF MERGERS AND ACQUISITION
CONGLOMERATION
Two companies that have no common business areas.
Risk diversification
Conglomerates can reduce the merged entities’ exposure to market fluctuations
and economic downturns. A well-diversified conglomerate may be more resilient
to economic headwinds in one industry because its other businesses in better-
performing sectors may stabilize its overall financial performance.

Global expansion
Conglomerate mergers can help companies establish market dominance without
directly competing in particular industries. By entering new, unrelated markets, a
company can broaden its reach and improve its financial performance.
Legally speaking, a merger requires two companies to form into a new entity
with a new ownership and management structure, ostensibly with members
of each firm.

An acquisition takes place when one company takes over all of the
operational management decisions of another. The more common
interpretive distinction rests on whether the transaction is friendly (merger)
or hostile (acquisition).
PRODUCT-EXTENSION
VERTICAL MERGER
MARKET-EXTENSION
“This also marks the company’s entry into the Cavite market and adds 3,000
students to its network — the largest in Southeast Asia’s private higher education
sector in terms of enrollment,” PHINMA Corporation said.

• PHINMA Araullo University, Nueva Ecija

• PHINMA Republican College
• PHINMA Cagayan de Oro College
• PHINMA University of Pangasinan
• PHINMA University of Iloilo
• Southwestern University PHINMA in Cebu City
• PHINMA Rizal College of Laguna
• PHINMA Union College of Laguna
• Horizon Education in Indonesia.
FORMS
OF MERGERS AND
ACQUISITION
(MANNER)
 STATUTORY
Statutory usually occur when the acquirer is much larger
than the target and acquires the target’s assets and
liabilities. After the deal, the target company ceases to exist
as a separate entity.
 STATUTORY
A statutory occurs when only one company, which is the acquirer,
retains its legal entity after the transaction. In this type of direct
merger, the newly combined entity ‘inherits’ the acquiring
company’s name. The target company can become a subsidiary of
the acquiring company, or its brand may be completely
discontinued, depending on the acquirer’s business strategy.
 SUBSIDIARY
In a subsidiary merger, the target becomes a subsidiary of
the acquirer but continues to maintain its business.
 CONSOLIDATION
In a consolidation, both companies in the transaction
cease to exist after the deal, and a completely new entity
is formed.
 Disney and 21st Century Fox (2019, USA) – Disney
acquired 21st Century Fox’s assets, absorbing Fox’s
entertainment assets while Fox ceased to exist as a
separate entity.

STATUTORY SUBSIDIARY CONSOLIDATION

MARKET- PRODUCT-
HORIZONTAL VERTICAL CONGLOMERATION
EXPANSION EXPANSION
 San Miguel Corporation (SMC) and San Miguel Brewery
Inc. (Philippines) – SMC merged with its brewery to
streamline operations, with the subsidiary being
absorbed.

STATUTORY SUBSIDIARY CONSOLIDATION

MARKET- PRODUCT-
HORIZONTAL VERTICAL CONGLOMERATION
EXPANSION EXPANSION
 Exxon and Mobil (1999, USA) – Exxon and Mobil
merged to form ExxonMobil, creating a brand-new legal
entity.

STATUTORY SUBSIDIARY CONSOLIDATION

MARKET- PRODUCT-
HORIZONTAL VERTICAL CONGLOMERATION
EXPANSION EXPANSION
MOTIVES
OF MERGERS AND
ACQUISITION
 ELIMINATE COMPETITION
Eliminating competition is a common goal of mergers and
acquisitions (M&A). It can help companies gain market share,
influence prices, and create barriers to entry for new competitors
How companies eliminate competition through M&A

• STRATEGIC ACQUISITIONS: Companies can acquire competitors to

create a dominant market position.

• CONSOLIDATING MARKET SHARE: Companies can merge with other

companies to gain a larger market share.

• CREATING BARRIERS TO ENTRY: Companies can create synergies that

are difficult for new competitors to replicate.
 VALUE CREATION
Two companies may undertake a merger to increase the wealth of their
shareholders
REVENUE SYNERGIES COST SYNERGIES
Revenue synergies are the extra revenue a Cost synergies are cost savings that result from
combined company makes after a merger or increased efficiencies after two companies merge.
acquisition. They happen when the combined They can be achieved through various cost-cutting
company can sell more products or services than initiatives, such as layoffs, technological
the two companies could have separately improvements, and supply chain advancements.
 DIVERSIFICATION
Mergers and acquisitions (M&A) may frequently undertaken for
diversification reasons like entering new market or offering new
products or services.
 ACQUISITION OF ASSETS
Mergers and acquisitions (M&A) can be motivated by a desire
to acquire certain assets that cannot be obtained using other
methods
 INCREASE IN FINANCIAL CAPACITY
Every company faces a maximum financial capacity to
finance its operations through either debt or equity
markets.
 TAX PURPOSES
Tax benefits are looked into where one company realizes significant
taxable income while another incurs tax loss carryforwards. Acquiring
the company with the tax losses enables the acquirer to use the tax
losses to lower its tax liability. However, mergers are not usually done
just to avoid taxes.
 INCREASE SUPPLY-CHAIN PRICING POWER

By buying out one of its suppliers or distributors, a business can

eliminate an entire tier of costs. Specifically, buying out a supplier,
which is known as a vertical merger, lets a company save on the
margins the supplier was previously adding to its costs.
INITIATING MERGERS AND
ACQUISITION PROCESS
INITIATING MERGERS AND ACQUISITION PROCESS

Perform valuation
analysis

Begin acquisition planning

Search for potential acquisition targets

Set the M&A search criteria

Develop an acquisition strategy

INITIATING MERGERS AND ACQUISITION PROCESS

Closing and integration

of the acquisition

Financing strategy for the acquisition

executing a final contract for sale

conducting a detailed examination and analysis

Construction of reasonable offer

PHILIPPINE COMPETITION
COMMISSION
The Philippine Competition Commission (PCC) is an independent quasi-judicial body mandated to
implement the national competition policy and enforce Republic Act No. 10667 or the Philippine
Competition Act (PCA), which serves as the primary law in the Philippines for promoting and protecting
market competition.

The main role of the Philippine Competition Commission is to ensure fair competition in the market for
the benefit of consumers and businesses.

PCC institutes a regulatory environment for market competition for two purposes:
• Protect consumer welfare by giving consumers access to a wider choice of goods and services at lower
prices.
• Promote a competitive business environment by enforcing the rules of fair market competition,
thereby encouraging market players to be more efficient and innovative.
The Rules on Merger Procedure issued by the Philippine Competition Commission took effect on
December 8, 2017, after the required publication. Significantly, the Rules revise the prescribed timing for
the filing of the required transaction notice under the Philippine Competition Act. Under the law, mergers,
acquisitions and joint ventures satisfying transaction thresholds must be notified prior to consummation.

The Merger and Acquisition Office (MAO) of the PCC is responsible for the review and investigation of
mergers and acquisitions that could substantially prevent, restrict, lessen competition in the relevant
market or in the market for goods or services.
PCC cites major concerns in approving SM-Goldilocks
acquisition deal
SEATWORK
 SEATWORK
[Link] Bank officially merged with __________ last January 2024

2. This is an example of which variety/type of M&A?

The ATRAM Group is the leading independent asset and wealth management firm serving institutional clients
and retail customers through intermediaries, by providing innovative products and unique customer experiences
delivered through technology-enabled platforms. Its goal is to secure its clients’ financial future.
3. This is an example of which variety/type of M&A?

The acquisition of Goldilocks Bakeshop by SM Investments

Corporation (SMIC)
 SEATWORK
4. This is an example of which variety/type of M&A?

BDO is a Tenant in Podium Complex

 SEATWORK
5. This is an example of which variety/type of M&A?

SP New Energy
Corporation (SPNEC) is a
renewable energy
company that develops
and operates solar
power generation
projects.
 SEATWORK

6. This is an example of which variety/type of M&A?

7. This is an example of which variety/type of M&A?
8. These are example of which variety/type of M&A?
9. In 2021, Malarayat Rural Bank and Rural Bank of Talisay merged.
Also, four rural banks in Cebu and Negros Oriental merged to form
First Philippine Partners Bank. This is an example of?

10. Rizal Polytechnic College, Rizal State College, and Rizal

Technological University merged. This is an example of?
THANK YOU!