The recent IPOs of several tech companies in Southeast Asia might give investors cause to wonder if the time is ripe for exits and consolidation in the region.
If you’re thinking along those lines, you aren’t far off from the truth. An analysis of recent changes in the market reveals four factors that are set to catalyze consolidation in Southeast Asia in the near future.
Startups have cash and are looking to spend it
After fundraising multiple times, there are a number of large and late-stage tech startups that have ample liquidity and are increasingly open to pursuing growth inorganically.
As more tech companies look to the super app business model to retain users and increase monetization, we could expect more inorganic expansion and consolidation in the coming years.
Recent M&A in the region indicates two key strategic considerations influencing acquisitions:
- Adding new product segments/verticals or markets into offerings.
- Strengthening their existing offerings (verticals or markets).
For instance, Grab acquired Singapore-based robo-advisory startup, Bento, in 2020. The acquisition was mainly driven by the strategic consideration of adding a new product segment, because it helped Grab bring retail wealth management and investment solutions to its users and partners.
The acquisition of the Singapore-based home renovation platform Qanvast by Livspace in 2021 is an example of the second strategic consideration. This acquisition helped Livspace strengthen and consolidate its position in existing markets (Singapore and Malaysia).
We’ve summarized some more examples of strategic acquisitions below:
As cash-rich tech startups become keener to seek inorganic growth, consolidation is likely to pick up.
Companies are expanding across regions and countries
Southeast Asia is culturally diverse and countries here are different 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., which give rise to very different consumer behavior and market characteristics.
As tech companies from neighboring countries and regions expand into Southeast Asia, the region’s diversity and differences pose challenges to their expansion, since each country likely requires a unique greenfield approach.