The recent IPOs of several technology companies in Southeast Asia could prompt investors to question whether the time is right for exits and consolidation in the region.
If you think in that direction, you are not far from the truth. An analysis of recent changes in the market reveals four factors that will catalyze consolidation in Southeast Asia in the near future.
Startups have money and want to spend it
After raising money several times, there are a number of large and advanced tech startups that: sufficient liquidity and are increasingly open to pursuing inorganic growth.
As more tech companies look to the super-app business model to retain users and generate more revenue, we can expect more inorganic expansion and consolidation in the coming years.
Recent mergers and acquisitions in the region point to two key strategic considerations affecting acquisitions:
- Add new product segments/verticals or markets to offers.
- Strengthening their existing offerings (verticals or markets).
For example, in 2020 Grab acquired Singapore-based robo-consulting startup Bento. The acquisition was primarily driven by the strategic consideration of adding a new product segment as it helped Grab provide retail wealth management and investment solutions to its users and partners. †
The acquisition of Singapore-based home renovation platform Qanvast by Livspace in 2021 is an example of the second strategic consideration. This acquisition helped Livspace to strengthen and consolidate its position in existing markets (Singapore and Malaysia).
We have summarized a few more examples of strategic acquisitions below:
As cash-rich tech startups increasingly seek inorganic growth, consolidation is likely to increase.
Companies are expanding across regions and countries
Southeast Asia is culturally diverse and the countries here differ from each other despite their geographical proximity. The region has 11 countries with a wide range of cultures, ethnicities, languages, religions, economic development status, etc., giving rise to very different consumer behavior and market characteristics.
As technology companies from neighboring countries and regions expand into Southeast Asia, the region’s diversity and differences pose a challenge to their expansion, as each country is likely to require a unique greenfield approach.