Venture capital and private equity investments in the Philippines may be minuscule compared to its Southeast Asian neighbours, but this year saw a number of promising developments that kept startups and investors busy.
The largest deal in the private equity space in the country this year was infrastructure investment firm Metro Pacific Investments Corp selling a 42.5 per cent stake in its hospital unit to a consortium led by buyout major KKR for $684.5 million. The deal saw Metro Pacific Hospitals defer a proposed initial public offering (IPO), which was tipped to become the country’s largest listing at $1.6 billion.
Philippines-focused PE firm Navegar made an initial close of its new fund – Navegar II LP – at $87.1 million, in a boost for the country’s middle-market, growth-oriented companies the firm seeks to back.
The Philippines, however, remains a small market for PE investing and it could take time for local entrepreneurs to adopt a mindset of creating and selling businesses, Alasdair Thomson, partner and co-founder of PE firm Sierra Madre, told DealStreetAsia.
Philippine conglomerates are still not rather keen on partnering with PE players since they may not need additional equity investment, said George S. Uy-Tioco, head of M&A at investment banking firm BPI Capital Corporation.
However, they are increasingly looking for partnerships in certain sectors to grow the business further, he added.
Local startups also have enough reasons to be bullish with the launch of new venture capital funds by local conglomerates this year. JG Summit Holdings Inc announced the launch of a $50-million fund that will invest in Series A and B rounds of digital and emerging startups.
Another listed conglomerate, Ayala Corporation, and its subsidiaries are raising a $150-million VC fund that will invest in new technologies, particularly in e-commerce, fintech, and healthtech.
In general, it is very hard to raise money locally primarily because there are not enough venture capital firms chasing startups in the Philippines, according to Francis Plaza, co-founder of fintech firm PayMongo, which this year raised $2.7 million in seed funding, the biggest in the history of the Philippine startup ecosystem.
A new initiative seeks to bridge some of that financing gap for the country’s micro, small, and medium enterprises and farmers. This month, Philippine-listed bank Rizal Commercial Banking Corporation (RCBC) partnered with 500 Startups-backed fintech firm Acudeen Technologies to launch a new 100-billion pesos ($2 billion) fund.
Local firms go on an M&A spree
Philippine conglomerate Ayala Corporation said in November it will invest $237.5 million to acquire a 20 per cent stake in Singapore-listed Yoma Strategic Holdings and First Myanmar Investment, which is traded in Yangon. Both the Myanmar-focused companies are led by tycoon Serge Pun.
Ayala Corp chairman and CEO Jaime Augusto Zobel de Ayala said the firm would like to ink more such deals in Southeast Asia if it finds similar opportunities.
Jollibee Foods Corporation, the operator of the country’s largest fast-food chain, continued its shopping spree to diversify its portfolio. This year, the company paid $350 million to acquire American specialty coffee and tea brand The Coffee Bean & Tea Leaf. More recently, it invested in a joint venture that will operate Tim Ho Wan Stores in Shanghai.
Udenna Corporation, a holding company founded by businessman Dennis Uy, in November bought the Philippine operations of international fast food restaurant chain Wendy’s, marking its latest venture in the food and beverage segment.
Some disappointments in the IPO market
Besides the shelved IPO of Metro Pacific’s hospital unit, the year also saw consumer tech firm Cal-Comp Technology delay a proposed $125 million IPO, citing market conditions.
But it wasn’t all bad news for the local bourse as Fruitas Holdings Inc, a food and beverage kiosk operator in the Philippines, raised roughly 1 billion pesos (around $20 million) in a November IPO. The company had originally targeted to raise up to 1.2 billion pesos ($23 million) through a share sale but trimmed the size of its IPO to “ensure a healthy performance of the stock upon listing.”
Deviana Chuo contributed to this story.