M&A in the Philippines: FDI Negative List and Sector Caps to Watch

Foreign investors are paying closer attention to mergers and acquisitions in the Philippines as deal activity accelerates in infrastructure, renewable energy, technology, and financial services. But ownership rules remain decisive. The Foreign Direct Investment (FDI) Negative List, alongside constitutional limits and sector-specific statutes, dictates what foreigners can and cannot own.

Since 2022, liberalization measures have narrowed the list of restricted sectors, but investors must still design transactions around caps, tender offers, regulatory reviews, and tax obligations.

Entering the Philippine M&A market in 2025 requires both awareness of these constraints and an execution plan that aligns ambition with regulation.

The changing investment landscape

The Philippine M&A market has grown more dynamic over the past three years. Amendments to the Public Service Act opened telecommunications, airlines, shipping, and railways to full foreign ownership by redefining what qualifies as a “public utility.” Renewable energy rules now allow foreigners to own 100 percent of solar, wind, and ocean energy projects. At the same time, traditional restrictions remain on land, education, advertising, and media.

The macro picture also signals investor confidence. Net FDI inflows were US$12.0 billion in 2021, before easing to US$9.2 billion in 2022, US$8.9 billion in 2023, and US$8.9 billion again in 2024. Equity capital placements continue to be led by Singapore, Japan, and the United States. This trendline shows that while inflows fluctuate, the Philippines has maintained a steady capacity to attract foreign capital, reflecting both liberalization reforms and growing investor confidence.

The Philippine Competition Commission (PCC) plays a central role by reviewing mergers that meet notification thresholds. The Securities and Exchange Commission (SEC) ensures proper disclosure of foreign shareholdings, while the Bangko Sentral ng Pilipinas (BSP) regulates investments in banking and oversees the registration of foreign capital for repatriation purposes.

These agencies, alongside sector regulators such as the Department of Energy and the National Telecommunications Commission, collectively determine whether a deal can close.

What the Negative List still restricts

The Twelfth Foreign Investment Negative List, issued in 2022 and still in force in 2025, reserves several areas for Filipinos. Mass media remains entirely closed to foreign equity. Advertising is capped at 30 percent, while recruitment firms are limited to 25 percent. Most private educational institutions are subject to a 40 percent cap.

The rice and corn industry is restricted to Filipino participation, and cooperatives must be fully Filipino-owned. These enduring prohibitions and caps remain the starting point of any foreign investor’s due diligence.

While some areas remain firmly closed, others have been liberalized, creating opportunities for majority or full foreign ownership.

Sectors Now Fully Open

Public services outside the narrow definition of a “public utility” can now be fully foreign-owned.

This includes telecommunications, airlines, railways, subways, expressways, and airports. The core “public utilities” — electricity transmission and distribution, petroleum pipelines, water and wastewater systems, seaports, and public utility vehicles — remain capped at 40 percent foreign equity. In renewable energy, 100 percent foreign ownership is now permitted for solar, wind, and ocean power projects under Department of Energy rules. Power generation itself is not considered a public utility, further opening the sector.

Yet despite these openings, many transactions are still shaped by restrictions that impose ceilings on foreign equity or demand joint ventures with Filipino partners.

Caps that still shape transactions

Retail trade remains a partially restricted sector. Foreigners may now own 100 percent of retail companies if they maintain a minimum paid-in capital of PHP 25 million (US$440,000). The Foreign Investments Act allows full ownership of small domestic enterprises with at least US$200,000 in paid-in capital, or US$100,000 if the business uses advanced technology, is a certified startup, or employs ten or more Filipinos.

Land ownership is still restricted, but the law now permits leases of up to 99 years, replacing the previous 50-year lease with a 25-year renewal. This longer lease term materially affects valuation and financing assumptions for real estate and asset-heavy acquisitions.

Education remains capped at 40 percent foreign equity, and advertising at 30 percent. Mass media continues to be closed, and small-scale mining and private security are likewise prohibited. Natural resources are capped at 40 percent foreign ownership, though participation is possible through service contracts or Financial or Technical Assistance Agreements. The rice and corn industry also remains restricted under Republic Act No. 3018, which requires Filipino control in operations.

The typical solution is a joint venture in which the Filipino partner holds majority ownership while the foreign party contributes curriculum expertise and brand recognition. Similar structures apply in natural resources, where foreign firms enter service contracts with the government or Filipino-majority companies to gain operating rights. These mechanics show how equity caps translate into concrete deal structures.

Once equity limits are understood, the next critical issue is how merger control and acquisition rules apply to both public and private entities.

Private entity acquisitions

Most M&A activity in the Philippines involves private companies rather than listed ones.

In these cases, there are no tender offer requirements, but PCC review still applies if thresholds are met. Foreign investors must ensure that the target’s shareholder structure complies with the FDI Negative List. If a private entity operates in a restricted sector without proper Filipino majority ownership, the acquisition could be voided or subject to forced divestment.

Private transactions also carry contractual complexities such as rights of first refusal, drag-along and tag-along rights, and shareholder agreement restrictions. Procedurally, closing a private entity deal typically requires notarized share transfer deeds, SEC filings to update Articles of Incorporation if foreign shareholding changes, and tax clearance on capital gains and documentary stamp duties. While these steps add procedural intensity compared to public market block trades, private deals offer greater flexibility in structuring governance rights and aligning with sector caps.

Merger control and public company acquisitions

The PCC requires notification when a party to the transaction has assets or revenues exceeding PHP 8.5 billion, and the size of the transaction exceeds PHP 3.5 billion. Transactions above this threshold cannot close without clearance, and the commission has 30 days for an initial review, with the option to extend for a further 60 days in a second-phase review. These timelines drive long-stop dates in Philippine deal documents.

For listed or public companies, acquiring at least 35 percent of voting shares within 12 months, or crossing the 50 percent threshold, triggers a mandatory tender offer to remaining shareholders.

Acquisitions that result in ownership above 50 percent also require a fairness opinion. Boards must integrate these rules into the sequence of block trades, tender offers, and settlement schedules.

Sectoral and Monetary Approvals

Banking deals require BSP clearance. Acquiring 10 percent or more of a bank’s voting shares without approval renders the transfer void, and ownership changes above 20 percent or that transfer control require prior Monetary Board approval. Telecommunications transactions remain subject to licensing by the National Telecommunications Commission, while energy projects require Department of Energy permits. These sectoral approvals are separate from competition review and should be built into the transaction timetable.

Foreign investors must also consider BSP registration of their equity investment. While not mandatory, registration is essential to ensure access to foreign currency for repatriating capital and remitting dividends. Without registration, investors may find their returns trapped in pesos.

Taxes that influence deal pricing

Tax costs are not prohibitive but must be priced accurately. For unlisted shares, capital gains tax applies at 15 percent of net gain, while documentary stamp tax is imposed at PHP 1.50 for every PHP 200 of par value. Listed shares sold through the exchange attract a stock transaction tax of 0.1 percent of gross selling price, reduced in 2025 from the previous 0.6 percent.

Asset deals may trigger value-added tax and local transfer taxes, which can shift relative pricing compared with share deals. These factors must be modeled into the opening term sheet and left consistent through closing.

A live example from 2025

In February 2025, Mitsubishi UFJ Financial Group acquired an 8 percent stake in Globe Fintech Innovations Inc. (Mynt), the operator of GCash, valuing the company at about US$5 billion. The deal illustrates how a foreign strategic investor can gain a significant position in a regulated digital finance company while staying within equity and tender offer rules. It also demonstrates the valuation context for digital platforms in the Philippines, highlighting how liberalization has encouraged foreign capital into sectors previously difficult to access.

A framework for investor decisions

Foreign boards should approach Philippine M&A by moving through a logical sequence of checks rather than relying on fragmented advice. The process begins with understanding where the target sits in relation to the Negative List and related statutes, since this immediately determines whether foreign ownership is permitted, capped, or prohibited.

Once this baseline is clear, the focus shifts to designing the right structure — whether a joint venture with a Filipino majority, a minority investment, or a full acquisition in an open sector.

From there, attention must turn to regulatory approvals, which include competition clearance from the PCC, disclosure requirements at the SEC, sectoral permits for regulated industries, and BSP registration to secure capital repatriation rights. Pricing must also account for taxes on transfers from the outset, because shifting assumptions later in the deal cycle creates avoidable friction.

Viewed in this order, what appears to be a complex regulatory environment becomes a predictable decision path that can be built into board-level planning.

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