M & A becoming a norm among PH companies
HIDEKI TANIFUJI Founder and CEO Asian M & A Links
Philippine businesses have finally come to a certain point of maturity that companies specializing in mergers and acquisitions (M & A) are locating in the country as they sense good prospects for their specialized kind of service.
HIDEKI TANIFUJI, Founder and CEO of Asian M & A Links (AMAL), has chosen the Philippines as his jump off point in the region. To do that, this Japanese street smart has to level up his company’s stature in the country, particularly among companies, with his plan to go public.
The company
Tanifuji, a college dropout in Japan, has been a successful real estate sales executive in Tokyo and evolved to become an M & A expert working with the country’s biggest advisory firm. He finally set up his own firm in fulfillment of a childhood dream.
“I was living a very comfortable life in Japan because my business was succeeding. I have lots of friends and life was very good,” says Tanifuji. But, before he reached 40, he decided to establish his own M & A business in Tokyo with two other co-workers in 2007. He sold his shares to his partners in 2014 to look for the next challenge.
“I was thinking about my future and I’ve decided to create a new life overseas,” he adds. His restlessness brought him to New York. After spending for less than a year in New York, he decided to put up his own M & A business in Asia drawn by the strong potential of the ASEAN region.
“ASEAN has big potential so I wanted to attempt a new M & A business in this region,” says Tanifuji. He compared all countries in the region and weighed the pros and cons.
He could have chosen Indonesia because it has a big population with good economic growth, but the culture there is unlike the Philippines. He was also thinking of Vietnam, but the government despite having opened up to the world is still not a democratic one. China, too, is good, but it has territorial issues with Japan, forcing some Japanese firms to leave.
Finally, the search was over and he settled for the Philippines.
“I chose the Philippines because it is the best country for both my business and personal life,” he adds. AMAL was established in 2015 in Makati. They are now located in Bonifacio Global City.
Now, AMAL is one of the country’s biggest M & A advisory firms in the country. It has good 70 manpower complement comprising of accountants, tax experts, investment consultants, and lawyers.
“We have a strong execution team composed of 5 accountants and two lawyers to support our clients’ needs from the beginning of the deal to closing,” says Tanifuji, noting that M & A is not just about coming up with price valuation, but there is a ton of information, network and experience involve in the transaction.
The fastest transaction they’ve closed so far was completed in two months.
Tanifuji intimated that small firms are more difficult than the big companies because they have two books. Sometimes, business owners do not also act professionally, he said.
But Tanifuji always looks into the interest of his client noting that “a lot of companies failed because of bad M & A.” If they find the transaction is not fair, he would recommend his client to just walk away from the deal.
IPO plans
“We are aiming for IPO in May next year,” says Tanifuji as he revealed plans of becoming publicly-listed in the country. This is all preliminary but the company is now talking with some banks, possibly China Bank as underwriter.
“We are not interested in fundraising because so far we don’t need outside capital,” says Tanifuji. But it is different when a company is listed in the stock market. It makes the business more credible. It is like a seal of good housekeeping.
“For our business, credibility is very important,” he adds. The proceeds are not that important that he is targeting to yield half a billion pesos only from the IPO.
According to Tanifuji, image is very important for their kind of business. He shared one instance when they were still located in a not so well-known address in Makati. At that time, they made an offer to one of the big conglomerates in the country to acquire another company. They were turned down. But when they have relocated in a more upscale location in BGC, the company suddenly turned up and expressed interest in their offer.
He believes that image means a lot to their credibility. Although he will not profit personally from becoming a publiclylisted company, Tanifuji thinks this is good for his business in the long term.
With a booming business, Tanifuji expects to beef up manpower to 100 this year to become the biggest M & A advisory firm in the Philippines.
He also looks forward to establishing a subsidiary in Thailand by end this year to kick start an expansion in the region.
In 2020, they are planning to have a total of 200 employees and become the leading M & A advisory firm in ASEAN with a huge portfolio in investment fund.
Business growing
“So far so good, we are getting bigger and expanding and generating big projects,” says Tanifuji, who intimated that all they have earned so far have been plowed back into the company. In fact, he has not gotten any company salary in the past three years.
They have undertaken six deals in the BPO, hotels, housing development and property sectors. They have around 50 projects so far. From the deals, they earn commissions.
Tanifuji noted that M & A advisory business is just beginning in the country, but it has long been part of the corporate life of every company in the US, Japan and the EU or the more developed economies.
In Asia, M & A is more popular in Hong Kong and Singapore because of their financial and investment maturity, but it is fairly new in the Philippines and the rest of the ASEAN region.
In Japan alone, there are 4 listed M & A companies. The biggest has market capitalization of over $6 billion while the second and which he used to be part of has market cap of $1.6 billion.
Although banks have their own M & A unit, most companies don’t. If they need to acquire or want to be acquired, they can go to an M & A advisory firm where they can be guided properly with the right information. According to Tanifuji, there are still lots of companies that are candidate for M & A.
“For instance, if a convenience store chain wants to acquire our prospect we can work with them until the closing of the deal,” he adds. He stressed that an advisory firm like them have lots of roles to play during the negotiation period.
The biggest M & A deal they have is still underway and could involve huge money. But they have so far closed its biggest, a R300-million deal for a resort hotel owned by a Japanese company.
All their clients are based in the Philippines while the acquirers are also 50 percent Filipino-owned while 30 percent are Japanese and the remaining 20 percent are other countries. But there are lots of M & As happening in the BPO sector.
“We have several advantages because we have foreign language speaker employees for Japanese, Mandarin, Arabic and Thai,” he adds.
The M & A business in the country has been expanding well. Banks have their own M & A units but not all. In the case of AMAL, the first two years were mostly investing their money, but now they are starting to harvest the fruits of their labor. “In the first two years, there were sleepless nights thinking I made a mistake, but now I realized my choice was correct,” he adds noting that his company’s success is buoyed by the growth of the domestic economy. “Right now, I feel the Philippine economy is following me because business looks interesting as the economy is growing,” he adds.
Most Filipino firms would like to expand their operations but they lack the financial muscle to do so. This makes them a good target for Japanese firms as they see local companies as still cheaper than others. By acquiring or merging these firms, they can easily expand operations.
M & A is also very important in growing a business. Japanese firms also need the impetus for growth. The Philippine economy is also ably fueled by the young demographics with average Filipino age of 23 as against Japan’s 45, he said.
“Japanese people don’t want house and cars anymore, but here in the Philippines, people are still spending their money for housing, cars and dining outside,” he adds noting that in Japan people are saving their money in the banks, which in turn are looking for borrowers so they can earn interest.
This makes the Japanese economy less exciting and even forcing companies to invest overseas particularly in ASEAN where business is booming, especially Philippines, Vietnam, and Indonesia.
“The Philippines has big potential for M & A for all kinds of services but especially BPOs and outsourcing,” he adds. He also noted the retail and distribution sector as having good potential for M & A for them to further expand.
Because of the new digital technology, the retail and distribution sector needs volume to expand their business. In Japan, the service industry and retail are the biggest target for M and A.
Undergraduate
Tanifuji is a street smart. He does not have the proper educational background to become a sophisticated M & A expert.
“I did not graduate from college, which is a rare case in Japan,” says Tanifuji, who hailed from Yamaguchi province, but preferred the big city like Tokyo and New York and now Manila.
While an undergraduate, he was fortunate enough to get employed in a real estate business where he was making good salary as a salesman. This led to his introduction to the world of M & A. Together with a friend, they partnered in an M & A business, which is now one of the largest in its category in Japan.
Since his dream was to go global, Tanifuji decided to sell his shares to his friend to explore opportunities outside of Japan.
The M & A sector provides the highest salaries in Japan. It pays higher than the banking industry, which is losing due to the financial technology. Tanifuji predicts the banking industry to be replaced by mobile banking in ten years.
He cited the world’s leading M & A advisory and investment bank companies which earn commissions from successful deals and operate through their knowledge and network, unlike the commercial banks which earn from interest rates.
Loves the Philippines
Tanifuji loves the Philippines and is proud to show to his family and daughter what he has achieved so far in this country. For the first time, his family will be visiting him next year.
He intends to continue his business here for the long haul and to even live here for good.
“So, now I am just focusing to be successful in this country,” says Tanifuji, who has been around the country, including the islands of El Nido, Boracay, Bohol, Iloilo, and Cebu mostly on business and leisure trips.
He expects to live simply but he finds living in the Philippines very comfortable because Filipinos are very friendly with very little biases unlike other nationalities.
“Besides, the English-speaking Filipinos give me several advantages for our business because we have clients from Australia, America, Europe and Chinese,” he adds. The Philippines is also just four hours away from Japan, making it very accessible for Japanese clients.
He also cited the Filipinos’ personality, practices and attitude as very helpful to their business.
“In this business, we have to be outgoing and to be able to establish good relationship one must have good disposition,” adds Tanifuji, who describes himself as continental Chinese for his aggressive stance in business.
Manila is also a big city with lots of good restaurants, hotels and markets. He loves the western culture.
“My favorite food is Bicol Express. I cannot complain because life in the Philippines is good,” adds Tanifuji, who as a young man left Yamaguchi because he cannot endure working in agriculture or in the manufacturing sector.
Lessons learned
“This is my dream,” says Tanifuji as he tried to hone his English. He said that before he was so scared because he cannot speak English, but he has been learning and polishing his English because he is in a business where the language is English.
As a young rich man, he was exposed to the best salary for a job that he loves so much. He drove top of the line cars and live in first class accommodations.
“We were young then so we spent a lot of good times and it was one of my dreams to be like that,” he adds, recalling his carefree life as a young Japanese millionaire. Now, he has mellowed down and loves to pace himself. He goes to the gym three times a week.
Notably Filipino women have a special place in Tanifuji. He was amazed at how Filipinas tried to work to help augment family income. In Japan, he observed, most women are not interested in having their own careers but are content to be simple housewife.
In his company alone, 70 percent are women. He does not mind though if the HR head hires gays, but he would ask them to explain if they are hiring men.
“Filipinas are very good, more responsible than the boys, who usually give me headaches,” says Tanifuji, who was very close to his mother who died in January of this year due to Parkinson’s disease. This could be the reason that he is also planning to help out research on Parkinson’s disease.
He has other plan: adopting kids. He said it is not difficult to adopt and raise kids in the Philippines even if he is busy because he can always hire nannies.
“I like to adopt kids from the poor communities to provide them with the opportunities denied of them,” he adds as he promised to be a good father.
“Society is unfair because I came from a poor family in Japan but, I have never experienced skipping a meal. But here in the Philippines, the rich are getting richer and the poor are getting poorer,” he adds.
Now, Tanifuji whose personal motto is “Create Life On Your Own”, is building AMAL’s own foundation using his own personal money to establish good system to support deserving Filipino students.
In their own way, Tanifuji can contribute to the Philippine economy and the society, as well.
“In the first two years, there were sleepless nights thinking I made a mistake, but now I realized my choice was correct. Right now, I feel the Philippine economy is following me because business looks interesting as the economy is growing.”