SEA to generate growth, more M&A

Following the unprecedented disruption due to the pandemic, Southeast Asian (SEA) executives became emboldened to drive internal transformation — digital and cost reduction — and their mergers and acquisitions (M&A), according to the 23rd edition of the EY Global Capital Confidence Barometer (CCB23).

With the survey of more than 2,400 executives in 52 countries, including 185 respondents across SEA, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, it found strong optimism among the evaluated business executives, as they expect a recovery in profitability to pre-pandemic levels by 2022 (59 percent), or even 2021 at 12 percent.

Respondents believe that the key areas where their organizations have outperformed during the pandemic include operational stability (66 percent), digital transformation (54 percent) and engagement with local communities (53 percent).

Sharper focus needed

Conversely, innovation in products and services, which is at 54 percent, scored the highest in underperformance.

“While respondents may feel that good progress has been made, they need to continue to sharpen their strategic focus, embrace the power of digital transformation, actively engage their customers and stakeholders and positively contribute to the communities in which they operate,” EY Global Strategy leader and EY ASEAN strategy and transactions leader Vikram Chakravarty said.

With their optimism for business recovery, over half of corporates (56 percent) are looking to actively pursue M&A in the next 12 months — the highest since 2012, beating the 11-year average of 44 percent.

While about half (46 percent) of corporates expect that SEA will generate the most growth prospects and opportunities for their organizations in the next three years.
According to EY Global Capital, other geographic areas that are expected to generate growth opportunities are India (18 percent), Japan (15 percent) and Oceania (11 percent).

While the top investment destinations (cross-border and domestic) among SEA corporates are India, Singapore, Japan, Thailand and China.

It said that technology, advanced manufacturing, power and utilities, consumer and financial services top the list of the most acquisitive sectors for SEA respondents.
An overwhelming 95 percent of respondents indicate that they are targeting cross-border deals.

 

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