Mergers and Acquisitions in Philippines: Keeping an Eye on FDI Negative List and Sector Caps

Foreign investors are increasingly interested in mergers and acquisitions in the Philippines as various sectors such as infrastructure, renewable energy, technology, and financial services witness a surge in deal-making activities. However, one crucial aspect that investors must keep in mind is the ownership regulations that govern these transactions. The Foreign Direct Investment (FDI) Negative List, in conjunction with constitutional restrictions and sector-specific laws, dictates the extent to which foreigners can have ownership in different industries within the country.

Although there have been liberalization efforts since 2022, which have reduced the number of sectors with restrictions, investors still need to navigate through sectoral caps, tender offers, regulatory reviews, and tax obligations when structuring deals. Entering the M&A market in the Philippines in 2025 requires a nuanced understanding of these constraints and a strategic approach that harmonizes business ambitions with regulatory frameworks.

Over the past few years, the M&A landscape in the Philippines has become more vibrant. Amendments to the Public Service Act have paved the way for full foreign ownership in sectors like telecommunications, airlines, shipping, and railways by redefining the definition of a “public utility.” Renewable energy regulations have also evolved to allow foreigners to own 100 percent of solar, wind, and ocean energy projects. However, certain areas like land, education, advertising, and media remain subject to traditional ownership restrictions.

The overall investment climate in the Philippines seems positive, with net FDI inflows reaching US$12.0 billion in 2021 and maintaining a steady flow in subsequent years. Leading the equity capital placements are countries like Singapore, Japan, and the United States, indicating the sustained attractiveness of the Philippines for foreign investment due to a mix of liberalization initiatives and growing investor confidence.

Regulatory bodies like the Philippine Competition Commission (PCC), Securities and Exchange Commission (SEC), and Bangko Sentral ng Pilipinas (BSP) play a crucial role in scrutinizing M&A deals that meet specific criteria. Sector-specific regulators such as the Department of Energy and the National Telecommunications Commission also have a say in determining the fate of proposed transactions.

Despite the easing of restrictions in some sectors, several areas are still off-limits to foreign ownership as per the Twelfth Foreign Investment Negative List issued in 2022 and currently in effect. Mass media, advertising, and recruitment firms have ownership caps ranging from 25 percent to 40 percent, while most private education institutions are limited to 40 percent foreign equity.

While some sectors are now fully accessible to foreign investors, many transactions still have restrictions in place to ensure joint ventures or impose caps on foreign equity. For instance, retail trade requires a minimum paid-in capital of PHP 25 million (US$440,000) for foreigners to own 100 percent of retail companies. Land ownership is still restricted, but there is now an option for leases of up to 99 years, which has implications on real estate valuations and financing strategies.

Education, advertising, mass media, small-scale mining, and natural resources are among the sectors with ownership limitations ranging from 30 percent to 100 percent for foreigners. Joint ventures are a common solution, with Filipino partners holding majority ownership while foreign entities bring in expertise and resources. This demonstrates how equity caps shape the deal-making structures in the Philippines.

Understanding these equity thresholds and navigating through the regulatory landscape are critical for foreign investors looking to make successful M&A deals in the Philippines. By aligning business objectives with legal parameters, foreign investors can unlock the vast potential that the Philippine market offers in various sectors.