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Thursday, 19 January 2017

(The Star) Big firms seen to consolidate further

Regional conglomerates facing challenging business climate
KUALA LUMPUR: Conglomerates in South-East Asia are likely to consolidate further over the long run amid the challenging business climate, says management consulting firm Bain and Co Malaysia Inc.
Partner Till Vestring said regional conglomerates had too many businesses which had to be consolidated or potentially divested to become much leaner operations.
“We see that mergers and acquisitions (in South-East Asia) has generally picked up and the conglomerates are also rethinking their portfolio,” he told reporters during a roundtable session on “How Conglomerates in South-East Asia Can Live Long and Prosper”.
However, he said the consulting firm was not anticipating anotherwave of consolidation in the financial services or telecommunications sectors in the region.
According to its study, South-East Asian conglomerates that executed 10 or more deals in terms of acquisitions and divestments have achieved a median total shareholder return of 13% between 2011 and 2015, during which non-acquirers achieved only 2%.
The study also showed that outside of the Philippines and Vietnam, top companies across South-East 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 and Co senior adviser Shahazwan Harris said conglomerates and single-focused businesses in South-East 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