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Consumer picks lure investment firms

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Consumer picks lure investment firms
Private equity firms are attracted to sectors that will benefit from strong consumption such as health care, education and financial services as well as opportunities presented by digital transformation. -- BW FILE PHOTO

By Krista A. M. Montealegre, National Correspondent

PRIVATE EQUITY firms still consider the Philippines a preferred destination in Asia despite a backdrop of declining foreign direct investment (FDI) flows, but opportunities for potential asset acquisitions are hard to come by as cash-rich families dominate deals.

During the 3rd Annual Private Equity and Venture Forum Philippines 2017 yesterday at Fairmont Makati hotel, foreign investors cited “political stability” as one of the key factors that “should not be discounted” when looking at investing in the country.

“We actually see the Philippines as a very stable political environment,” said Cyrus Driver, managing director at Swiss private investment firm Partners Group, which has acquired outsourcing firm SPi Global from PLDT Global Investments Corp., an indirect PLDT, Inc. subsidiary, and CVC Capital Partners Asia III.

“We may or may not agree on some actions, but it has been a democratic process. In the last 10-15 years, it has been a smooth transition from government to government,” said Adrian Teng, group finance director of Jardine Cycle and Carriage Limited that has interests in Tantoco-led Rustans Supercenters, Inc. and Cebu-based Rose Pharmacy.

In the same forum, Presidential Adviser for Entrepreneurship Jose Ma. “Joey” A. Concepcion III asked participants to ignore noise from the outbursts of President Rodrigo R. Duterte, the perceived crackdown of his administration on political opposition and his bloody war on the narcotics trade.

“Wait for two to three years and if (the data) is (still) low then we have a problem,” Mr. Concepcion III said, referring to the 16.5% year-on-year drop in net FDI inflows to $3.904 billion in the seven months to July that was reported by the central bank last Tuesday.

“What I’m trying to tell the investment community, while you can still make money in the Philippines, stay here… You are investing here because you get a return on capital, plain and simple,” Mr. Concepcion said.

RIDING ON STRONG CONSUMPTION
Private equity firms are attracted to sectors that will benefit from strong consumption such as health care, education and financial services as well as opportunities presented by digital transformation.

Private equity in the Philippines is a nascent industry. Despite strong appetite, large deals have been scarce, with values of those completed averaging $10-20 million.

“We’re lucky if we get to $50 million,” said Chris Teoh, executive director at TAEL Partners, an investment firm focusing on Southeast Asia.

The dominance of family-owned conglomerates has resulted in limited opportunities for foreign investors, and the select few that are opening up are demanding a hefty premium for a minority share in their companies.

“The local incumbents have the balance sheet, local knowledge and the connections,” said Miguel P. Perez, founder and chief executive officer of digital payments start-up Ayannah.

“There’s a huge opportunity here, but you have to bring in more than just cash.”

A huge population, relatively deep Internet penetration and improving payment infrastructure are ushering in a “perfect storm” for deal-makers seeking to cash in on the Philippines’ strong economic growth momentum, IP Ventures Group President Enrique Y. Gonzalez said.

For Gladys V. Enhaynes, director at ICCP SBI Venture Partners, “[t]here is education maturity that has to happen.”

“We have a long way to go. We have to start and I think we’re starting.”

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