Report: Mergers and Acquisitions for SMEs Study Meeting, 23-26 November 2010, Daejon, Republic of Korea

Ramon Lopez of Go Negosyo (center) receiving his APO Certificate

BRIEF DESCRIPTION AND BACKGROUND OF THE PROJECT

The project emanated from two previous sessions that observed the increasing number of Mergers and Acquisitions especially after the recent financial crisis. The Project assessed the benefits of Mergers and Acquisitions in enhancing productivities, introduction of technologies, skills, markets and brand images. There are also other advantages for selling companies especially in cases where there are no successors, or losing from fierce competition. Mergers and Acquisitions offer an option to realize the value from the business rather than straight closure. The project therefore sought to enhance the benefits from Mergers and Acquisitions in the region, and how this can be further promoted.

OBJECTIVES

To examine the latest trends in Mergers and Acquisitions
To assess the opportunities and challenges of Mergers and Acquisitions in Asia
To share best practices in Mergers and Acquisitions among SMEs in increasing productivity

OBJECTIVES FOR PARTICIPATION

As we are at the forefront of helping SMEs in the country as the main objective of our advocacy, the subject Study Meeting was deemed very helpful in further enhancing my knowledge on strategic Mergers and Acquisitions, especially as it pertains to the SMEs. I found the Project Objectives aligned with the objectives of our programs. I was hoping to get exposed to other country’s best practices, the various Mergers and Acquisitions between local and foreign firms, the aftermath of the global financial crisis and other forms of Mergers and Acquisitions. The learnings definitely will give a strong boost to our programs that empower SMEs in the country, as I will be able to share these learnings to our seminar participants.

Being in the midst of all the stakeholders in entrepreneurship, from private sector businessmen, government, academe, NGO’s, I believe I will be able to share a wealth of information as well on the experiences in our company and other SMEs we deal with. My educational background and experience in development economics, entrepreneurship, corporate strategic planning, Mergers and Acquisitions, actual marketing, finance and business development activities would help and I am very open to share all of these

PROFILE OF PARTICIPANTS

There were about 15 participants in the project, from Japan, Korea, Vietnam, Thailand, Cambodia, Iran, Singapore, Philippines, and resource speakers from Taiwan, Switzerland, Korea. The profile of Filipino participants – There were only two of us, the other one is the head of legal services in the Small Business Corporation, an attached financial institution under the DTI, that aims to facilitate the provision of financial services to the Micro SME sector in the country.

HIGHLIGHTS

The Project discussed the framework behind the Mergers and Acquisitions, the factors leading to Mergers and Acquisitions, the benefits, costs, and the trends and the various countries’€Mergers and Acquisition experiences, the strategic reasons, pros and cons at the country, firm and individual levels of Mergers and Acquisitions. The resource person also covered recent statistics on the subject, the government interventions and support to Mergers and Acquisitions, especially in financing, Mergers and Acquisitions-related policies and laws, and other assistance like Mergers and Acquisition Funds and Incubation programs.

There were no site visits. After the country presentations, we were divided into 3 workshop groups that deliberated on the strategic reasons behind Mergers and Acquisition cases, the benefits and challenges at the firm level, and the moving forward action steps. The workshop outputs were evaluated and commented on by the resource speakers from Taiwan and Korea. A summary presentation and conclusions, and the Korean model were presented by the key resource person from Korea.

OUTCOMES AND EVALUATION

The SME Mergers and Acquisition Study Meeting covered M & A trends in Asia, benefits to countries and how it encourages productivity improvements and synergies, strategic reasons at the firm level, pros and cons, and sharing of country experiences.

I consider the Study trip to Korea a success as it met my expectations. The other Filipino participant and I presented our papers jointly. To complement our presentation, Atty. Dasal gave a backgrounder and the governing laws on M & A’s in the country, and I provided the various examples of M&As that took place, the motivations, and the Policy Recommendations.

In discussing M & A’s, I shared our Selecta- Unilever merger and how it has been very successful, and the key factors in that success, the Jollibee acquisition of Mang Inasal, and the earlier acquisitions of Red Ribbon, Greenwich, Chowking. SMC’s move to non-food and for different strategic moves, the Metro Pacific Group acquisitions, etc.

M & A’s allow greater options for SME’s, not just to close down in difficult times, but find greater value to what they started, and that the entrep spirit in them is not sold, and the proceeds allow them to pursue other passions and ventures. We cited many cases. There was a slightly healthy debate on this as one participant suggested that Mergers and Acquisitions discourages entrepreneurship.

On the other hand, news on selling at greater enterprise value inspire and encourage others on building brands and enterprises. Such is the case of the recent P3 Billion sale of Mang Inasal to Jollibee. M&As also provide greater options for other family corporations, where there’s no clear successors. A new finding that surfaced in our group workshop is the fact that Mergers and Acquisitions allow companies to professionalize the organization, or free-up the owner’s next generation (especially in cases where there are no interested successor) to pursue their different passions and fields of interest. In pursuing their passions, that normally lead to greater successes, and in the end, should result in greater country productivity (and happiness index too).

We had workshops after the country presentations and I was also asked to present our workshop output. The Session and workshops covered also next steps, such as mounting information campaign for M & As for SMEs, a topic not often discussed, developing an information databank, business matching opportunities for SMEs, Guidebook for them to cover information on this topic, the pros and cons, various ways of enterprise valuation, procedures and taxation incentives (for SMEs), lowering of M&A transaction costs, having an SME M & A Fund (as in Korea), and incubation programs. In Korea, although of limited success, the incubation program is pursued as it signals the support for innovative, R & D oriented and differentiated SMEs, and the pursuit of enterprising spirit in the country. They sound like the advocacy of Go Negosyo.

All these are fed to the organizer, Asian Productivity Org (APO) which will be possible subjects of future studies and conferences.

RECOMMENDATIONS AND ACTION STEPS

The Session and workshops covered also next steps, which I believe APO and the Philippine NPO can consider supporting in the future-

1. To mount an information campaign for Mergers and Acquisitions for SMEs, a topic not often discussed;
2. Develop an information databank, business matching opportunities for SMEs;
3. Develop a Guidebook to cover information on this topic such as the rationale for Mergers and Acquisitions, pros and cons, various ways of enterprise valuation, procedures and taxation incentives (for SMEs);
4. Support policy recommendation to lower Mergers and Acquisition transaction costs;
5. Consider tax incentives or have an SME M & A Fund (as in Korea);
6. Assess and restructure the MSME incubation programs in the country to make it more effective in addressing the needs of the sector.

I also personally committed to include the subject of M&As for SMEs in our various seminars and mentor-ship activities, as well work on those action steps within our capabilities, like the information databank and the Guidebook for SMEs.

SUBMITTED BY:

RAMON LOPEZ
Executive Director
Philippine Center for Entrepreneurship (Go Negosyo)

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