SEA conglomerates to consolidate further in long run

0

KUALA LUMPUR: Conglomerates in Southeast Asia are likely to consolidate further over the long run amid the challenging business climate, says management consulting firm, Bain & Company Malaysia Inc.

Partner Till Vestring said the regional conglomerates had too many businesses, which had to be consolidated or potentially divested to become much leaner operations.

“We see that merger and acquisitions (in Southeast Asia) has generally picked up and the conglomerates are also rethinking their portfolio,” he told reporters during a roundtable session on “How Conglomerates in Southeast Asia Can Live Long and Prosper” yesterday.

However, he said the consulting firm was not anticipating the next wave of consolidation in the financial services or telecommunications sectors in the region.

According to its study, Southeast Asian conglomerates that executed 10 or more deals in terms of acquisitions and divestments have achieved a median total shareholder return of 13 per cent between 2011 and 2015, during which non-acquirers achieved only two per cent.

The study also showed that outside of the Philippines and Vietnam, top companies across Southeast Asia saw negative revenue growth between the period, driven in part by intensified competition.

Vestring said the common market created by the ASEAN Economic Community would accelerate and provide opportunities for the conglomerates to succeed outside their home markets.

Meanwhile, Bain & Company Senior Advisor Shahazwan Harris said conglomerates and single-focused businesses in Southeast Asia had started to acquire technology companies to support their current operations.

“The number of transactions in Malaysia has been quite good especially in venture capital in technology.

A lot of activities are seen in Malaysia but the size is smaller…the bigger merger and acquisition deals are still in Singapore and Thailand,” he added. — Bernama