[B-SIDE Podcast] Private equity in light of the pandemic

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Bain & Company, a management consulting firm based in the United States, said that the Philippines might benefit in global efforts to diversify supply chains and focus on business process outsourcing to cope with the economic decline brought about by the COVID-19 pandemic.

Last year was a challenging year for private equity firms in Southeast Asia, with deal value slipping to $12 billion from $14 billion a year ago. Alessandro Cannarsi, a partner at Bain, said the COVID-19 pandemic may change the situation in favor of countries like the Philippines.

In this episode, Mr. Cannarsi speaks with BusinessWorld reporter Denise Valdez about the country’s prospects in tech-driven sectors.

TAKEAWAYS

The Philippines might be able to close at least two private equity (PE) deals this year.

“I think there’s going to be a slowdown [in PE deals] in 2020, but possibly, we’ll come out of this year with a couple or three deals in private equity in the Philippines and possibly go back up from there in 2021,” said Mr. Cannarsi.

“I don’t think the deal flow will completely dry up. In fact, we’ve seen that in the past five years, private equity firms that generated the best returns were those that kept investing during the down cycle,” he added.

The Philippines is poised to benefit from the growth of technology-driven industries and the diversification of global supply chains after the COVID-19 pandemic.

“If you think about it, we’re going through a large experiment in doing things remotely,” Mr. Cannarsi said. This is expected to result in the growth of online shopping and digital healthcare, sectors where the Philippines can play a role.

“Sectors that have revenues in markets like the US such as BPO, IT (information technology) services, where the Philippines is strong, could get a leg out in attracting private equity investments interest,” he said.

The increasing tension between US and China — and Japan’s plans to pull out companies in China — could benefit the Philippines.

“[The Philippines has] a flourishing services sector, which is strategically well-located to diversify some of the supply chain for western and Japanese companies. And because of the high English communication skills in the Philippines compared to other Southeast Asian countries, it is very advertised in the west,” Mr. Cannarsi said. “I think it’s a candidate for actually benefitting from some diversification of the supply chain.

In order to attract PE firms into the country, Mr. Cannarsi said the Philippines can work on enhancing corporate governance standards, on the company level, and increasing transparency on deal flows, on the country level.

Recorded remotely on May 4. Produced by Nina M. Diaz, Paolo L. Lopez, and Sam L. Marcelo