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News
Survey: Most BPOs consider equity funding
Summary
Outsource2Philippines (O2P), in partnership with the Business
Processing Association of the Philippines (BPA/P), recently conducted
a survey to assess the interest of companies engaged in the Offshoring
and Outsourcing industry (O&O) in the Philippines in generating
equity funding through an Initial Public Offering (IPO) or other
means. The survey was sent to 305 members of BPA/P and its affiliated
O&O associations. The survey was conducted from July 9-22, 2008,
and a total of 81 responses were received, providing a 27% response
rate. The results showed:
- Sixty-five percent of respondents indicated they are contemplating
equity funding or may do so in the future. Thirty-two percent
are actively considering equity funding, while 33% indicated they
may consider equity funding "later".
- Forty-four percent of respondents plan to seek equity funding
in the next one to two years, while 27% plan to seek equity funding
in the next six months (6%) to one year (21%).
- Fifty-eight percent of respondents target to raise between
P100 million and P500 million in equity funding, while 12 percent
will seek between P500 million and P1 billion. One respondent
intends to seek between P5 billion and P10 billion. Twenty-seven
percent of respondents indicated that they will seek less than
P100 million in equity funding.
- Respondents indicated that they are considering a variety of
sources of equity funding: 1) Angel investment: 29%; Venture capital:
37%; Private placement: 54%; and IPO: 37%.
- Sixty-eight percent of respondents said the U.S. is a good
source of equity funding; 47% the U.K., and 44% Singapore. Thirty-five
percent of the respondents said the Philippines is a good source
of equity funding.
- Most respondents feel that the Philippine financial system
is at least somewhat conducive to setting up and funding a technology
startup. To the statement "The Philippine financial system is
conducive to setting up and funding a technology startup", 36%
responded "somewhat"'; 31% responded "yes"; and 17% responded
"Yes, very much".
- Sixty percent of respondents said "funding expansion of existing
facilities" and "funding business development initiatives, such
as setting up a marketing office overseas" were the biggest motivation
for seeking equity funding. Forty-nine percent said "funding development
of new facilities" while 40% indicated "funding the acquisition
of new technology".
- Sixty-eight percent of respondents said their profitability
track record was "good" (54%) or "excellent" (14%).
- Fifty-three percent of respondents said "loss of control" was
the most significant downside to seeking equity funding, while
47% indicated "burdensome regulatory requirements". Forty-four
percent of respondents indicated they may forego equity funding
because of the availability of other financing alternatives.
(Manila, Philippines, August 12, 2008) - A survey of executives of companies in the offshoring and outsourcing (O&O) industry showed that a majority of respondents are actively considering some form of equity funding to support their expansion plans. But only 27% of the respondents plan to seek equity funding in the next six months to one year, and only six percent - two respondents - plan to seek equity funding in the next six months.
Conducted by Outsource2Philippines.com (O2P) in cooperation with the Business Processing Association of the Philippines (BPA/P), 81 respondents representing BPA/P members and members of affiliated associations participated in the survey. The survey was distributed to 305 prospective respondents, and had a response rate of 27%. Thirty-five percent of respondents indicated that they have no plans to seek equity funding.
O2P and BPA/P will conduct a senior-level breakfast briefing September 18 to present the results of the survey to top industry personalities. The briefing will feature presentations by investment experts and a panel of industry executives whose companies have sought or have plans to seek equity funding in the future. Information on the briefing is available at http://www.teamasia.com/events/BPAP_ORGP2008/index.html, including the agenda with confirmed speakers.
Among respondents who are contemplating equity funding, almost 60% plan to raise between P100 million and P500 million, while 12% target equity infusion of between P500 million and P1 billion. One respondent plans to seek between P5 billion and P10 billion in equity funding. About 30% of respondents indicated equity requirements of less than P100 million. "These results suggest that respondents are confident their organizations will continue to grow but that access to equity funding will impact that rate of growth," said O2P CEO Frank Holz.
Respondents are considering a variety of sources of equity funding, including angel investment (29%), venture capital (37%), and an initial public offering (IPO) (37%). However, most respondents, 54%, indicated a preference for a private placement. Loss of control appeared to be an important factor in seeking equity funding for respondents that favored private placement. Over 70% of respondents that indicated private placement indicated that loss of control represented a significant downside to seeking equity funding.
Most respondents, 60%, said that funding expansion of existing facilities and funding new business development initiatives are the principal motivators for seeking equity funding. Forty-nine percent said funds raised would be used to finance development of new facilities. "Clearly, development of the equity market in the Philippines can significantly accelerate industry development," said Oscar Saņez, BPA/P CEO.
Loss of control was also the biggest disadvantage (53%) to equity funding in the perception of respondents seeking equity funding now or in the future. Forty-seven percent identified burdensome regulatory requirements and 44% said the availability of other sources of funding aside from equity funding might result in a decision to refrain from seeking equity funding to finance expansion.
The United States was viewed as a good source of equity funding by almost 70 percent of the respondents, followed by the United Kingdom (47%) and Singapore (44%). Thirty-five percent considered the Philippines a good source of equity funding. Almost all respondents considering equity funding now or in the future consider the Philippine financial system at least somewhat conducive to setting up and funding a technology startup. Only 17% said it is not conducive, and 17% said it is very conducive.
Sixty-seven percent indicated that the Philippine financial system is somewhat conducive or conducive to setting up and funding a technology startup. Sixty-eight percent of respondents indicated that their companies have a good or excellent track record of profitability.
The major sponsor for the September 18 breakfast briefing, "On the Road to Going Public: A Forum for Corporate Executives Considering Equity Funding," is ATR KimEng Capital Partners. Minor sponsors are ExcelAsia, First Metro Investment Corporation, and Globe Business.
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