BDO Capital – Market Volatility Does Not Hamper Opportunities

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BDO Capital president_Eduardo V. Francisco
BDO Capital president_Eduardo V. Francisco

THE investment banking arm of BDO Unibank remains optimistic on the growth trajectory of the Philippine economy even with the prevailing volatility in the markets causing investors to be more cautious.

Business sector continued to expand this year. Fourteen banks and corporates raised P120 billion in bonds and long term deposits in the debt market, while another 10 companies obtained P166 billion in capital through the equity market via public offers as of end-August.

Such optimism continues to present opportunities for issuer and investor clients alike to access the capital markets for fund-raising and investment prospects. For potential issuers, BDO Capital and Investment Corp. (BDO Capital) said there is a need to engage them continuously on a real-time basis so that they can be given timely guidance as clients embark on a capital-raising program such as an initial securities offering.

There are typically three phases involved in a public offer, explained BDO Capital.

First is the housekeeping stage which prepares a company to go public and involves determining which businesses to include in the IPO, getting financial reporting systems in order, and setting up good corporate governance policies and the corresponding infrastructure to implement these policies. Next is the regulatory application stage or the filing with, and presenting the company to, the market regulators for deal approval so that they can access public funds. Finally, the public offering.

“The most difficult part would be the first phase since the company must be committed to changing its business culture from a family owned or informally run operations to a company that has clear growth plans, and is committed to transparency and good governance,” explained BDO Capital president Ed Francisco.

The second stage meanwhile requires close coordination with the regulators to make sure that the company is deemed worthy of “going public”. Once the first two stages are done, the last stage gives the company the opportunity to access the capital markets via public offer of its securities as opportunities present themselves.

“In this final phase, BDO Capital believes that both the company and investors must come to terms with a win-win situation. Hence, BDO Capital, being in this business for some time now, will work with both sides to make sure that the offering becomes a successful deal for both parties¨ said Francisco.

Essential component

A key element in the success of a transaction, both from the perspective of the company and investors, is the discipline of providing real-time, market based feedback to the company. This allows the company to properly understand investors’ views regarding the investment proposition and constantly evolving market conditions in general, and thus giving the issuer the opportunity to make the necessary adjustments to the transaction.

This feedback mechanism is extremely important when market conditions are volatile and even more critical during times of market turbulence.

“If, as a result of this continuing feedback, it is determined that pursuing a transaction will serve the interests of the company, by raising its funding requirement, and investors, by providing a value enhancing investment proposition with tangible prospects for reasonable returns, then BDO Capital will recommend that the transaction proceed,” noted Francisco.

On the flipside, he added though that if it is determined that either an issuer’s or investors’ interests are not well-served by pursuing a transaction as scheduled, BDO Capital will not hesitate to recommend the deferment of an issue until such time that market conditions are deemed more suitable to address the interests of all concerned.

A multi-awarded investment bank by various global financial publications, regulators and industry associations, BDO Capital will continue to provide and guide issuer clients no matter what prevailing market conditions are.

“The market will always be there. Our job requires us to be excessively attuned to market conditions and prospects.  We therefore always aspire, to the extent possible, to price transactions fairly for both issuers and investors. And we are committed to see a successful issuance hit the market where all parties involved are satisfied and long term relationships between issuers and investors are fostered,” said Francisco.