Tuesday, April 03, 2007

49. The Selling of Unisearch

In 1988, Rey Alejandro advised me that the concern was now going to pursue in earnest the spinning off of the market research unit. I was called to a meeting that included the then PRC Chairman, Cesar Bautista. In the meeting were Rey and the Commercial Director Jan Prudon. Cesar asked me to put together a strategy wherein Unilever could get best monetary value out of the spin off, maintain over the long term the high quality market research service despite it being no longer a Unilever service and to see to it that current employees’ interests are well served even as they sever their relationship with the concern.

Unisearch had an average annual trading profit of more than three million pesos over the last three years at that time. A good valuation of the unit would be a multiplier of between five and seven of the average trading profit. This could give the unit a market value of twenty one million pesos at the top end, an amount that can more than take care of funding the retirement and redundancy reparations of Unisearch employees. Not bad considering that the spinning off of the other company divisions which were done earlier entailed costs to the company over and above the redundancy payments as they had to assist them in their start up operations. The Unisearch spin off may have given Unilever a net gain even after paying the retirement and redundancy packages.

To ensure that the quality of the research service to Unilever is maintained even after the Unisearch spin off, I recommended limiting our prospects to the big and international practitioners in the business. Market research is a dynamic industry where new research methodologies as well as constant enhancements to standard methodologies are being introduced almost every year. We needed to ally ourselves with a company that is progressive to ensure that the market research employed for Unilever is state of the art. We gave top priority to Research International because of the Unilever heritage of the company but they were not interested at that time because their investment priorities were in Europe where they embarked on an aggressive acquisition and affiliation tact. The two other suitors were the Singapore based Survey Research Group, the largest market research network in Asia Pacific and Frank Small, an Australian company who had an existing unit in the Philippines, and with a fairly extensive presence in South East Asia. Earlier Survey Research Group had bought Consumer Pulse, the largest market research company in the Philippines which was owned by Rosie Chew, formerly the research manager of P&G Philippines. Rosie and Peter Weldon, one of the regional directors of SRG represented the network in the negotiations to acquire Unisearch.

We finally settled with Survey Research Group. The terms agreed upon were to use a multiplier of six, thus, an eighteen million peso outright sale. To protect the employees it was agreed with SRG that the employees will enjoy the same salaries and privileges as in Unilever and that Unilever will give the employees their retirement and redundancy pays despite the fact that they will continue to work and get the same pay, albeit, with a new company. This was the anxiety of most of the people in Unisearch. In the UK, when Research Bureau, Limited of Research International, the erstwhile research company of Unilever was spun off, the employees did not get their retirement pay because what transpired was just a change of company ownership.

I was a bit apprehensive about the carrying over of the same salaries and benefits into the new company. Unilever being a multinational company was at the top end of the remuneration spectrum in companies operating in the Philippines. An independent Unisearch will not have the same resources to afford the generous salary packages that were promised the carryover employees. However, I needed to assure the employees that we were getting into the best deal possible since most of them were feeling downhearted with the thought of leaving Unilever and getting into an upstart company. Getting their retirement money plus the additional redundancy pay appeased most of them. I knew that I was in for a rough ride on the first year. The eighteen million payment to Unilever was borrowed from a Hongkong bank and was part of the indebtedness of the new company. This was mostly as payment for the company name Unisearch and was amortized for twenty years, almost a million pesos a year saddling the fledgling company. What kept my hopes up was the three-year business guarantee from Unilever. A large business base such as that will make for less cash flow pressures and a good starting point to build the business. With the business guarantee Unilever insisted on a competitive lockout. It meant not being able to do business with their main competitors namely P&G, Colgate, and other companies actively engaged in markets where Unilever operated locally. As an SRG company this was not much of a problem because Consumer Pulse, now a sister company, took care of companies that we were constrained to serve. This also worked with other industries. In the petroleum industry we handled Shell while Consumer Pulse took on Caltex. We serviced Asia Breweries while they did San Miguel. This did not matter in the smaller markets whose research requirements tended to be ad hoc and infrequent.

SRG did not provide start up funds. No working capital infusion from the parent company happened. Unisearch was to fend for itself from day one. I negotiated for early payments of unsettled bills on Unilever projects to have some operating funds. To take care of immediate operating expenses I had to open a bank account in my name to draw funds for day-to-day expenses until we could open a corporate account. On our first year we would be dependent on the graciousness of Unilever to make quick payments of our bills. The Market Research department was quick to acknowledge and process our billings. Payment release by the Commercial Division was expedited with the help of Efren Samonte, who at that time was the PRC Commercial Director. It might have helped that Efren was an alumnus of Unisearch where he worked as my department accountant.
SRG allocated some shares of the new company for sale to management members of the new company. I distributed these among the directors and managers who joined me in the spin off.

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