Expansion through Acquisition: A Key Growth Driver in the Philippine Banking Sector
Mergers and acquisitions by key players in the industry have been a major driver for growth and expansion in the Philippine banking sector. Acquisitions, as of late, have commonly involved purchase of assets or equity.
In the case of BDO Unibank, Inc. (BDO), its strategy of selective acquisition of banks has contributed to its growth, eventually earning for itself the distinction of being the largest bank in the Philippines in terms of assets since 2008. Most notable is the acquisition of Equitable PCI Bank in 2007, which ensued as one of the biggest bank mergers in the Philippines. Prior to the merger, BDO had already acquired four major banks, significantly expanding its network reach.
BDO's latest foray into expansion involved the acquisition of the Rural Bank of San Juan, Inc. (RBSJI), one of the Philippines' largest rural banks in terms of resources and branch network. This acquisition, completed in July 2012, added 30 branches to BDO's existing network. Martinez Vergara Gonzalez and Serrano (MVGS) advised BDO in the transaction.
The acquisition of RBSJI involved the purchase of assets and deposit liabilities including the branch licenses, as well as the procurement of regulatory approvals and incentives. Discussions between the parties commenced in December 2010, with the definitive transaction documents signed in January 2011. As counsel to BDO, MVGS was actively involved in all aspects of the acquisition, including structuring the transaction, securing the requisite approvals from Philippine banking regulators, namely, Bangko Sentral ng Pilipinas and Philippine Deposit Insurance Corporation, and providing guidance throughout the integration process.
The RSBJI acquisition, while smaller compared to other bank mergers and acquisitions in the Philippines in the past decade, including those undertaken by BDO itself, is a good model which can be replicated for bank acquisitions involving purchase of specified bank assets and liabilities. The extensive experience of BDO and its advisers in bank acquisition was key in ensuring the successful completion of the acquisition of RBSJI notwithstanding challenges in terms of asset valuation, regulatory processes, realty title and lease transfers, employee absorption as well as transition and integration issues, including those involving information technology and other administrative systems.
With strength of experience at the core of its bank merger and acquisition practice, MVGS is proud to play a role in the growth of the banking sector in the Philippines.
This article is written by Elmer B. Serrano, a senior partner of Martinez Vergara Gonzalez and Serrano, and was published in Acquisition International Magazine. He is the principal counsel of BDO in the acquisition of RBSJI, and has likewise had the privilege of advising BDO in nearly all its mergers and acquisitions