Latest / SEA of Startups / 🎙EP 18: 400% Returns: How Transformational M&A and AI Will Redefine Southeast Asia’s Next Decade

Transcript

🎙EP 18: 400% Returns: How Transformational M&A and AI Will Redefine Southeast Asia’s Next Decade · SEA of Startups

• 0:00
  SPEAKER_01: All right.
• 0:00
  So we've seen over in Southeast Asia that there's been an
• 0:06
  uptick in M&A activity.
• 0:10
  And then I end up running across a report that made me want to
• 0:13
  just jump into that conversation.
• 0:17
  SPEAKER_01: So
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  Quick gut check for every founder in Southeast Asia is you
• 0:21
  shouldn't really be
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  SPEAKER_01: asking just how do we grow,
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  SPEAKER_01: but it's asking about will this survive?
• 0:26
  SPEAKER_01: What's coming?
• 0:28
  Companies these days,
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  whether you're a startup or a big corporate around the region,
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  Companies that transform while they transact are delivering
• 0:36
  significantly more
• 0:38
  SPEAKER_01: shareholder returns,
• 0:40
  SPEAKER_01: upwards of over 400% over the last decade,
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  SPEAKER_01: and that is significantly outpacing the S&P.
• 0:49
  SPEAKER_01: It's a different game, it's a different scoreboard.
• 0:52
  SPEAKER_01: Deloitte just ended up coming out with a new M&A playbook,
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  SPEAKER_01: which is the idea of what we're going to be talking about here today.
• 1:01
  SPEAKER_00: And the number is like three times S&P, so that's pretty big.
• 1:06
  SPEAKER_00: And translation,
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  SPEAKER_00: if your M&A playbook is buy for skill,
• 1:10
  SPEAKER_00: cut some costs,
• 1:11
  SPEAKER_00: you're bringing a butter knife to a lightsaber fight.
• 1:14
  SPEAKER_01: We're going to unpack a little bit about this report,
• 1:16
  SPEAKER_01: some of the playbook,
• 1:18
  SPEAKER_01: and unpack how Southeast Asia winners need to build capability stacks.
• 1:24
  SPEAKER_01: During the deal, not after, there's six practices that they highlight.
• 1:29
  SPEAKER_01: We're talking real receipts, no fluff.
• 1:31
  SPEAKER_00: And welcome back to the Sea of Startups.
• 1:32
  SPEAKER_00: I'm Kim.
• 1:33
  SPEAKER_00: Here's Kevin.
• 1:34
  If you're a founder,
• 1:35
  operator,
• 1:35
  or investor who is,
• 1:37
  well,
• 1:37
  allergic to passwords,
• 1:39
  good.
• 1:39
  SPEAKER_00: This is the anti-password episode.
• 1:43
  SPEAKER_00: And let's get into it.
• 2:01
  SPEAKER_01: M&A is very sequential.
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  SPEAKER_01: You buy, you integrate it, and maybe you worry about transforming later.
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  But transformational M&A is running this strategy plus
• 2:16
  execution plus transformation
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  SPEAKER_01: all in parallel,
• 2:20
  SPEAKER_01: and it's blending the defensive resilience,
• 2:23
  SPEAKER_01: cost excellence,
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  SPEAKER_01: value chain strength with the offensive tactics of tech,
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  SPEAKER_01: adjacencies,
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  SPEAKER_01: ecosystems,
• 2:31
  SPEAKER_01: and so on.
• 2:32
  SPEAKER_00: And it's a hybrid if you think about it.
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  SPEAKER_00: And these are the six habits that show up in
• 2:37
  outliers so number one is leadership mandate number two is the
• 2:40
  all based on
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  SPEAKER_00: portfolio number three is transform as you transact so everything is done
• 2:45
  concurrently and ai at the core which relates again to point
• 2:50
  number three and power
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  and collaboration and the last one is with ai um you know in
• 2:57
  the picture right now
• 2:58
  SPEAKER_00: workforce is changing at a rapid phase
• 3:02
  SPEAKER_00: workforce for tomorrow.
• 3:03
  And you got to pin this because we'll track them through in the
• 3:06
  next few examples coming up.
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  SPEAKER_00: And why this matters now in C is because capital is choosy,
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  SPEAKER_00: cross-border complexity is a moat,
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  SPEAKER_00: and slow integrators are getting eaten.
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  SPEAKER_00: And because we live in hyperbole right now, things are changing so fast.
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  The founders who can change shape without losing their soul,
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  you know,
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  they win.
• 3:27
  SPEAKER_01: This is important for a number of reasons.
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  SPEAKER_01: Southeast Asia does not have a massive amount of M&A activity.
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  SPEAKER_01: Historically,
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  most of this sort of build versus buy decision making that the
• 3:40
  large conglomerates
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  SPEAKER_01: have been making has always been skewed towards the build.
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  uh it's been a little bit problematic in regards to the
• 3:49
  activity especially when
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  you start talking about acquiring startups and the activity
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  there but we have seen
• 3:57
  more and more players from outside the region coming in and
• 4:01
  doing similar sort of
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  playbooks as this deloitte report started coming out so i think
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  that the two prong
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  SPEAKER_01: of this
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  is really that we need to see a lot more of the existing
• 4:13
  corporates in the region
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  SPEAKER_01: thinking about growth,
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  SPEAKER_01: offense,
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  SPEAKER_01: and defense through the M&A lens.
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  And we also need to look from a startup standpoint of building
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  out and accelerating
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  SPEAKER_01: our growth,
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  SPEAKER_01: not solely from the organic building,
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  SPEAKER_01: building,
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  SPEAKER_01: building,
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  SPEAKER_01: but also from acquisitions can accelerate that growth.
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  Let's do receipts and let's just look at a couple of examples
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  and be C-specific.
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  SPEAKER_00: I get that there are not many M&As coming out of Southeast Asia,
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  SPEAKER_00: but if you think about it,
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  SPEAKER_00: Grab seems to be the poster child for programmatic capability stacking
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  SPEAKER_00: transformation.
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  SPEAKER_00: Or if you look at the other one,
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  SPEAKER_00: KUDO,
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  SPEAKER_00: O2O rails into Indonesia's unbanked and it integrated with GrabPay.
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  SPEAKER_00: So that's another example of...
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  you know,
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  the power of collaboration and which led to acquisition as
• 5:08
  well,
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  like Bento.
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  SPEAKER_00: I could hire Robo Advisory, rebranded Grab Invest to put wealth in app.
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  SPEAKER_00: And then the digital full bank license,
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  SPEAKER_00: Grab Singtel wins,
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  SPEAKER_00: you know,
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  SPEAKER_00: the Monetary Authority of Singapore's Greenlight,
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  SPEAKER_00: no cost synergy,
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  SPEAKER_00: but business moral service area.
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  And then you have another one that's Jaya Grocer,
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  which I think any Malaysian would know of.
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  They had a majority stake and enabled grocery and demand and
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  increased their retail footprint.
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  SPEAKER_00: So that's one way to look at it.
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  SPEAKER_00: And it's not just the random deals that Grab is doing.
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  SPEAKER_00: Literally,
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  SPEAKER_00: for lack of a better word,
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  SPEAKER_00: pun intended very much,
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  SPEAKER_00: they're grabbing onto any opportunity that comes their way.
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  SPEAKER_00: And that's every piece that's fortifying the superaptises.
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  SPEAKER_00: It's distribution, it's data, it's daily habit.
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  In some way of the word,
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  it's creating its own ecosystem that is robust,
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  that is resilient to...
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  a lot of things but the thing is on a flip side it's not making
• 6:08
  much money so yeah
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  grab definitely isn't necessarily printing money in the land of
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  profitability but
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  they did end up building out more capabilities they needed to
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  get the finance side
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  of it they wanted to get more offerings for the grab delivery
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  services so that they
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  SPEAKER_01: could make further utilization of that fleet
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  so they did they did so those those acquisitions did make sense
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  now i don't know uh
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  i never dug into the numbers in regards to the roi so flashing
• 6:38
  back to that
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  deloitte number of the 400 percent um but certainly they have
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  ended up driving some
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  some some uh some defensiveness of the business and some
• 6:47
  synergies there uh but
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  we're also seeing i mean one of the it's not just the local
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  players the startups
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  SPEAKER_01: that have been acquiring in i mean
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  SPEAKER_01: In the news just recently was foreign player media company,
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  SPEAKER_01: Publicis,
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  SPEAKER_01: that just acquired a company.
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  SPEAKER_01: That was in the news this week as well.
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  SPEAKER_01: So we do actually see a lot of M&A.
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  SPEAKER_01: M&A does happen.
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  The challenge is that the majority that's leading the M&A
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  process in Southeast Asia
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  SPEAKER_01: oftentimes is coming from abroad.
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  The primary acquirers,
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  they're coming in,
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  they're acquiring into the region.
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  SPEAKER_01: And they're going to be building a lot of capabilities coming into here.
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  SPEAKER_01: There is a necessity for some of the existing companies,
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  SPEAKER_01: again,
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  SPEAKER_01: whether you're startups or later,
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  SPEAKER_01: to start looking at it and thinking about increasing your surface area,
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  SPEAKER_01: increasing your coverage,
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  and taking the tactical approach of figuring out how M&A fits
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  into the scheme of
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  SPEAKER_01: things.
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  SPEAKER_01: There's a number of examples across the region that we could point to.
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  SPEAKER_01: You just were talking about Grab,
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  SPEAKER_01: I mean,
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  SPEAKER_01: not necessarily a company that's printing money,
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  SPEAKER_01: but Ninja Van did a ton of acquisitions as well.
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  I think some of that may end up having to be unwound because of
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  some of the challenges.
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  SPEAKER_01: But you also have a number of other ones.
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  SPEAKER_01: And within the corporate range,
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  SPEAKER_01: we can,
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  SPEAKER_01: corporate realm,
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  SPEAKER_01: unfortunately,
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  SPEAKER_01: not as many examples that we could point to.
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  SPEAKER_00: Not many, but still pretty notable ones.
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  At least these ones have become pretty much the household names
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  of Southeast Asia.
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  SPEAKER_00: Say, for example, Property Guru, before and around its 2022 SPAC.
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  SPEAKER_00: And they didn't just add these things.
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  SPEAKER_00: They built data, mortgages...
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  SPEAKER_00: development side assess.
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  SPEAKER_00: Timing was rough, but the capability thesis was sung.
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  Just last year,
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  10 months ago,
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  they were taken private by a 1.1 billion deal by EQT.
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  And again,
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  this is just one of the prime examples of capability is more
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  than a category label.
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  SPEAKER_00: And on the flip side,
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  SPEAKER_00: just right across the causeway,
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  SPEAKER_00: you know,
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  SPEAKER_00: DBS is a corporate side masterclass.
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  SPEAKER_00: It's one of the banks and it's the bank in Singapore,
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  SPEAKER_00: a 27,000 person tech company that happens to be a bank.
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  SPEAKER_00: taken banking to a different level.
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  SPEAKER_00: It's now a tech company,
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  SPEAKER_00: which is,
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  SPEAKER_00: you know,
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  SPEAKER_00: doing banking as well,
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  SPEAKER_00: you know,
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  SPEAKER_00: and they do DBS,
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  SPEAKER_00: Quick Finance,
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  that uses data AI to shrink SME loan journeys from days to near
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  instant for
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  SPEAKER_00: pre-qualified segments.
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  SPEAKER_00: It's not a cost stream and it's a product advantage.
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  With AI capability,
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  almost every company now,
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  it's turning to be a tech company.
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  SPEAKER_00: Everywhere is tech.
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  You have tech this,
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  tech that,
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  and Singapore is pretty much all things tech at this point.
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  SPEAKER_01: It's a good time to be in tech.
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  I think more and more of these corporates should hopefully be
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  waking up to it and
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  SPEAKER_01: realizing that most of them don't have the in-house capabilities.
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  SPEAKER_01: Most corporates just do not.
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  SPEAKER_01: And so...
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  The logical thing for many of them to be thinking about is to
• 10:07
  go out and acquire
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  SPEAKER_01: those skill sets.
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  SPEAKER_01: And that oftentimes means M&A activity,
• 10:13
  SPEAKER_01: acquihires,
• 10:15
  maybe just strategic partnerships if it doesn't need to be
• 10:17
  deeply integrated.
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  But I think we're going to start seeing M&A becoming a much
• 10:21
  more relevant piece of the equation.
• 10:24
  SPEAKER_01: And I'm hopeful that a lot of the local companies,
• 10:28
  SPEAKER_01: big and small,
• 10:29
  SPEAKER_01: start waking up to the reality that in order for them to keep up,
• 10:33
  SPEAKER_01: They're probably not going to be able to hire their way into this.
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  They're either going to end up having to onboard more software
• 10:40
  or they're going to
• 10:40
  SPEAKER_01: end up having to acquire their way into it in order to get the digital
• 10:44
  SPEAKER_01: transformation that I believe that they actually need.
• 10:48
  SPEAKER_00: Yeah.
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  SPEAKER_00: And now it makes me think, you know, in this era, it's moving so fast.
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  SPEAKER_00: And there are so many AI companies in this region as well.
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  SPEAKER_00: Not as famous as the one globally like Lovable and Superbase.
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  SPEAKER_00: And there are,
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  SPEAKER_00: even in the ecosystem as well,
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  SPEAKER_00: there are so many build cups that are coming up,
• 11:08
  SPEAKER_00: especially on Luma.
• 11:08
  SPEAKER_00: If you're Luma,
• 11:10
  SPEAKER_00: I'm on an AI segment.
• 11:11
  SPEAKER_00: I see so many activities going on.
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  SPEAKER_00: Then my next question would be,
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  SPEAKER_00: given like what you said,
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  SPEAKER_00: that M&A,
• 11:18
  SPEAKER_00: it's going to be increasingly more relevant.
• 11:21
  SPEAKER_00: What's the bi-coding scene like in Southeast Asia?
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  Because this is one of the reasons,
• 11:27
  one of the ways that we could accelerate AI adoption,
• 11:29
  right?
• 11:30
  And then from there,
• 11:30
  it kind of trickles through the company-wide point of view.
• 11:35
  SPEAKER_00: And how does that look like, you think?
• 11:38
  A lot of corporates are going to start having a different
• 11:42
  balance in regards to the
• 11:44
  SPEAKER_01: build versus buy.
• 11:46
  SPEAKER_01: So the computational thought process that a company goes through,
• 11:52
  SPEAKER_01: generally speaking,
• 11:53
  SPEAKER_01: comes down to the build versus buy.
• 11:55
  And the dynamic that tipped the scales oftentimes was the
• 11:59
  complexity and the
• 12:00
  SPEAKER_01: resources required to build and maintain
• 12:04
  ended up being too much and oftentimes they would simply buy
• 12:09
  software or they would
• 12:10
  buy a buy a company and integrate it more often than not you're
• 12:14
  just simply buying
• 12:15
  software but what's going on these days and i don't think that
• 12:20
  the the the
• 12:21
  mainstream um five coding tools are really going to change this
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  because like
• 12:27
  SPEAKER_01: Not lovable,
• 12:28
  SPEAKER_01: not replete,
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  SPEAKER_01: not any of those ones that are presently the most commonly talked about.
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  Those are for the low end of the spectrum in regards to what
• 12:36
  you're trying to build.
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  SPEAKER_01: For the most part,
• 12:39
  SPEAKER_01: you're not going to ship,
• 12:40
  you're not going to be able to produce enterprise-ready or
• 12:44
  enterprise-grade
• 12:45
  SPEAKER_01: products,
• 12:45
  SPEAKER_01: at least not yet.
• 12:47
  SPEAKER_01: But some of the other tooling,
• 12:49
  SPEAKER_01: if you're using cursor or some of the other,
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  if you already have technical resources that have some level of
• 12:56
  savviness,
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  SPEAKER_01: they become superpowered with this.
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  So the entire dynamic of build versus buy that plays into the
• 13:04
  decision to buy
• 13:04
  SPEAKER_01: software,
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  SPEAKER_01: it plays into the decision for M&A activity,
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  SPEAKER_01: that is shifting.
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  So while I am optimistic that I think M&A activity is going to
• 13:14
  be on the rise,
• 13:15
  I am cognizant of the fact that teams are becoming leaner and
• 13:19
  that if you do have
• 13:22
  SPEAKER_01: the in-house capability,
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  SPEAKER_01: you do have the ability to build a lot of things.
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  That doesn't mean necessarily that M&A is going to go away
• 13:30
  because buying the
• 13:31
  SPEAKER_01: product is only part of the equation.
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  SPEAKER_01: A lot of times you can copy a product.
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  SPEAKER_01: Many times when you're going into M&A,
• 13:38
  SPEAKER_01: you're buying a team,
• 13:39
  SPEAKER_01: you're buying distribution,
• 13:41
  SPEAKER_01: you're buying customers,
• 13:42
  SPEAKER_01: you're buying much more than just the product itself.
• 13:45
  SPEAKER_01: That might be some intellectual property,
• 13:48
  SPEAKER_01: but the key to it,
• 13:49
  SPEAKER_01: because as we say in venture a lot,
• 13:52
  SPEAKER_01: ideas are a dime a dozen,
• 13:53
  SPEAKER_01: execution is what matters.
• 13:55
  SPEAKER_01: That's the key component when you start talking about it.
• 13:58
  SPEAKER_01: You're buying the machine, not the idea of how a car works.
• 14:02
  SPEAKER_01: You're buying the car.
• 14:04
  SPEAKER_00: It's very product-focused, again, in some way.
• 14:07
  SPEAKER_00: It's after all the ideas and execution,
• 14:09
  SPEAKER_00: what's the end product that M&A is going to happen,
• 14:12
  SPEAKER_00: right?
• 14:13
  SPEAKER_00: That's what you're looking at.
• 14:14
  SPEAKER_00: And to your point about how companies are getting leaner,
• 14:17
  SPEAKER_00: like,
• 14:18
  SPEAKER_00: for example,
• 14:18
  SPEAKER_00: Aura Finance,
• 14:19
  SPEAKER_00: a company that we also featured,
• 14:21
  SPEAKER_00: I've connected with one of the people from the operations side,
• 14:26
  SPEAKER_00: and it's just operating on a 100-people basis.
• 14:28
  SPEAKER_00: Given how fast it's growing, it's relying a lot on AI.
• 14:31
  SPEAKER_00: And that's just one example about how...
• 14:35
  lean organizations are becoming nowadays and the future of
• 14:38
  workforce it gets more
• 14:40
  competitive and more people are just fighting for one role it
• 14:43
  begs the question
• 14:44
  that anyone who is in this workforce is looking for work has to
• 14:49
  have ai in their
• 14:50
  back pocket you cannot not have it um yeah that's a bit of a
• 14:55
  digress but yeah
• 14:57
  SPEAKER_01: It does kind of come into the aspect.
• 15:00
  So like if we link back to some of the tactical components of
• 15:05
  this report on M&A,
• 15:07
  SPEAKER_01: when it was talking about the playbook,
• 15:09
  SPEAKER_01: the number one aspect that they listed on there was leadership.
• 15:13
  And I think leadership does come from an aspect of being able
• 15:18
  to understand the
• 15:21
  SPEAKER_01: necessity of the skills required for the organization of the future.
• 15:27
  SPEAKER_01: I'm thinking through not just that,
• 15:30
  but as well as the many other considerations in regards to what
• 15:34
  it means to succeed
• 15:37
  SPEAKER_01: and win a market in Southeast Asia,
• 15:40
  SPEAKER_01: which is the regional thinking,
• 15:43
  SPEAKER_01: understanding of the regional patchwork.
• 15:46
  SPEAKER_01: It also means that you're having to have solid understanding of
• 15:49
  SPEAKER_01: the technical capabilities.
• 15:52
  SPEAKER_01: Because ultimately,
• 15:53
  the fragmented markets dealing with the archipelago of
• 15:57
  Philippines and Indonesia,
• 15:58
  SPEAKER_01: dealing with the complexity of the borders,
• 16:01
  SPEAKER_01: the infrastructure,
• 16:03
  SPEAKER_01: all of these different aspects,
• 16:05
  SPEAKER_01: a lot of those end up becoming more technical problems.
• 16:08
  SPEAKER_01: Competing against,
• 16:09
  for the companies that are moving forward with strong
• 16:12
  leadership in those respects,
• 16:15
  SPEAKER_01: or having that lens associated with it,
• 16:17
  SPEAKER_01: I think they're going to be at a competitive advantage.
• 16:19
  SPEAKER_01: So that's one of the tactical lenses that we're in that
• 16:31
  SPEAKER_00: In total so far, they highlighted six.
• 16:33
  SPEAKER_00: So the second one is about the always-on portfolio.
• 16:36
  So it's pretty much treating products and geographies like how
• 16:40
  Tamasi treats assets,
• 16:41
  right?
• 16:41
  SPEAKER_00: Like they're pruned, you know, they double down and they rotate.
• 16:44
  And instead of looking at,
• 16:47
  you know,
• 16:48
  typical revenue P&Ls,
• 16:50
  they are looking at capability P&Ls.
• 16:52
  It's looking at a broad level about how everything comes
• 16:55
  together than just looking
• 16:56
  SPEAKER_00: at one dimension information,
• 17:00
  SPEAKER_00: which how we used to,
• 17:02
  SPEAKER_00: at least from a financial standpoint.
• 17:04
  SPEAKER_00: But now it's very strategic how you can see all coming together,
• 17:09
  SPEAKER_00: how it fits into the revenue,
• 17:10
  SPEAKER_00: how it kind of affects expenses and what not,
• 17:13
  SPEAKER_00: what to cut,
• 17:13
  SPEAKER_00: what not to cut.
• 17:15
  SPEAKER_00: It's not just looking at just expenses as a line item,
• 17:19
  SPEAKER_00: but what contributes to the expenses or what contributes to the revenue.
• 17:23
  SPEAKER_00: So it's more on a pretty much comprehensive and well-rounded basis.
• 17:27
  SPEAKER_00: And, you know, being always on with AI now, with tech being so...
• 17:34
  instrumental in part of our lives you always have to be on so i
• 17:37
  think it kind of
• 17:38
  translates into that always on portfolio it's not just us it's
• 17:41
  also within the
• 17:42
  company within the portfolio within the pnl that you it's
• 17:46
  always going to be there
• 17:47
  SPEAKER_00: and you know in today's market you know date with date weight just kills
• 17:51
  SPEAKER_00: optionality you got to look things uh you got to look at things from uh
• 17:57
  SPEAKER_00: 360 view rather than a 180 view, right?
• 18:01
  SPEAKER_00: From the report as well,
• 18:03
  SPEAKER_00: what I got to take away is that instead of software as a service now,
• 18:08
  SPEAKER_00: it's literally like what we said,
• 18:11
  SPEAKER_00: right?
• 18:11
  SPEAKER_00: 360 view is transformation as a service.
• 18:15
  You transform as you transact and you start the operating
• 18:17
  models and culture
• 18:18
  SPEAKER_00: integration during due diligence.
• 18:21
  SPEAKER_00: So if you're bold on it later,
• 18:23
  SPEAKER_00: you've bought shelfware.
• 18:24
  SPEAKER_00: So it's pretty much go, not pay as you go, but transform as you go.
• 18:30
  That links into the other one,
• 18:32
  which as they put it,
• 18:34
  it's transform as you transact,
• 18:37
  which like,
• 18:38
  Really means basically doing away with the linear approach
• 18:42
  where it's kind of this
• 18:43
  SPEAKER_01: stage sort of pre-deal strategy.
• 18:46
  SPEAKER_01: Then you move on sequentially to the post-deal execution.
• 18:50
  SPEAKER_01: Instead,
• 18:51
  what they're talking about and the way to optimize the outcomes
• 18:55
  is you're starting
• 18:56
  SPEAKER_01: the transformation aspects from the pre-deal stage.
• 19:00
  The moment that you start thinking about it,
• 19:02
  you're starting the transformation process.
• 19:04
  You're starting the aspects of understanding the
• 19:09
  transformational imperatives
• 19:11
  SPEAKER_01: associated with it,
• 19:12
  SPEAKER_01: whether you're talking about the digital platforms,
• 19:15
  SPEAKER_01: data architecture,
• 19:17
  SPEAKER_01: technical capabilities,
• 19:19
  you're working those into the strategy and the execution from
• 19:24
  the early stages as
• 19:26
  SPEAKER_01: opposed to waiting until after the fact.
• 19:28
  And I think,
• 19:29
  you know,
• 19:30
  historically,
• 19:31
  the thing that I took away on this is that
• 19:34
  There's been data in the past that talks about the frequency of
• 19:38
  failures of M&A activities.
• 19:42
  And the takeaway here for me is partially that when done
• 19:48
  poorly,
• 19:49
  you can have poor results.
• 19:51
  SPEAKER_01: When done well, you can end up having great results.
• 19:56
  And I think that's the aspect of proper planning and proper
• 20:00
  implementation from day one.
• 20:02
  not waiting until the end of it and being proactive as opposed
• 20:06
  to reactive.
• 20:07
  That's the approach that they seem to be pushing as your
• 20:11
  ability to scale earlier,
• 20:12
  SPEAKER_01: accelerate the transformation.
• 20:14
  SPEAKER_01: So as you're transacting, you're not necessarily starting from step zero.
• 20:20
  SPEAKER_01: You're actually at the point where as you're integrating,
• 20:22
  SPEAKER_01: you're simply accelerating what's already there.
• 20:26
  SPEAKER_01: So the loss of time
• 20:28
  SPEAKER_01: you're able to deliver significantly more value in there.
• 20:32
  SPEAKER_01: And there's,
• 20:33
  SPEAKER_01: as I said,
• 20:34
  you simply have less post-deal integration time and the
• 20:38
  resource burden becomes
• 20:40
  SPEAKER_01: less if that process is starting from the very beginning.
• 20:43
  SPEAKER_00: If that's the case,
• 20:44
  SPEAKER_00: if a lot of people are taking proactive stance now,
• 20:48
  SPEAKER_00: then would that mean that although acquisition will still happen,
• 20:53
  SPEAKER_00: but sometimes when you sell off part of your company,
• 20:56
  SPEAKER_00: it also means that you lose control.
• 20:59
  SPEAKER_00: Then my next question, would you think that...
• 21:02
  More startups will be keen to that aspect of being acquired
• 21:08
  because I'm reading so
• 21:09
  much about how there are many startups and many founders who
• 21:12
  are not that keen on
• 21:14
  SPEAKER_00: going the VC route rather,
• 21:16
  SPEAKER_00: but just to build what they have before getting acquired.
• 21:20
  SPEAKER_01: What I'm talking about is from the perspective of the acquirer.
• 21:24
  SPEAKER_01: So that's all from the acquirer.
• 21:27
  SPEAKER_01: So you are going to have a loss of control because you're being acquired.
• 21:33
  SPEAKER_01: You're now part of a bigger organization.
• 21:37
  Now,
• 21:38
  I've heard a lot of people say that they're not thinking about
• 21:41
  that pathway.
• 21:43
  SPEAKER_01: But to be honest with you,
• 21:45
  when you've been working and building and going through the
• 21:48
  struggles for a handful
• 21:50
  SPEAKER_01: of years,
• 21:51
  or if somebody comes around and starts offering you more money
• 21:54
  than you've ever
• 21:55
  SPEAKER_01: seen in your life,
• 21:57
  SPEAKER_01: that decision starts becoming a lot easier.
• 22:02
  yeah um yeah there are many um like ai sam altman all these
• 22:06
  stories they do have
• 22:07
  those stories it's a good point to note but then again um it
• 22:10
  depends on how much of
• 22:11
  your soul that you're willing to sell and your hard work that
• 22:14
  you're willing to
• 22:14
  sell to lose that control again it's a very personal i mean
• 22:17
  there's always time for
• 22:18
  SPEAKER_01: a second or third act uh as i tell people
• 22:25
  SPEAKER_01: Exits may not always come back.
• 22:28
  SPEAKER_01: So if somebody,
• 22:29
  SPEAKER_01: if a corporate comes around and is interested in acquiring you,
• 22:33
  SPEAKER_01: they're doing it for strategic reason.
• 22:36
  SPEAKER_01: So if you say no,
• 22:38
  don't think that they're gonna stop and give up on the entire
• 22:41
  idea that made them
• 22:43
  SPEAKER_01: attracted to wanna acquire you in the first place.
• 22:46
  SPEAKER_01: They will likely find another way.
• 22:48
  SPEAKER_01: They may end up acquiring somebody else.
• 22:51
  SPEAKER_01: They may end up prioritizing another option and you're well off,
• 22:56
  SPEAKER_01: or they may end up becoming a competitor.
• 22:58
  but the option that you still have them anytime you want to be
• 23:02
  acquired is simply
• 23:04
  not true and so i've seen many times where acquisition offers
• 23:09
  were on the table and
• 23:11
  then things go sour and they are no longer there so many times
• 23:17
  especially when it's
• 23:18
  SPEAKER_01: really life-changing amounts of money
• 23:21
  um i wouldn't always encourage startup founders to think think
• 23:25
  very hard hard about
• 23:26
  it now if it's extremely undervaluing the company that's a
• 23:32
  completely different
• 23:33
  story if you know you've built something and and and most
• 23:37
  people are in agreement
• 23:38
  that you've built something that's worth 100 million dollars
• 23:40
  and somebody comes
• 23:41
  SPEAKER_01: around and offers you 20.
• 23:42
  sure your life could change with 20 million dollars but that's
• 23:45
  that's a pretty
• 23:46
  SPEAKER_01: gross undervaluation
• 23:49
  SPEAKER_00: Again, it's a lot about context.
• 23:52
  SPEAKER_00: Context as matters as to how much you're looking at.
• 23:55
  SPEAKER_00: And, you know, you just want to undersell yourself.
• 23:58
  Getting back to it is that the fourth one would be,
• 24:01
  you know,
• 24:01
  AI at a core.
• 24:02
  SPEAKER_00: You know, this is not cost out.
• 24:04
  SPEAKER_00: Is it business model shift?
• 24:07
  SPEAKER_00: Underwriting, route optimization, pricing, discovery.
• 24:11
  SPEAKER_00: I mean,
• 24:11
  SPEAKER_00: if your M&A thesis doesn't have an AI spine,
• 24:15
  SPEAKER_00: in this day and age,
• 24:17
  SPEAKER_00: it's pretty much half-baked.
• 24:19
  The skill that you're supposed to grow,
• 24:23
  I don't think it will have that speed.
• 24:25
  SPEAKER_00: So AI has to be at a quarry.
• 24:28
  SPEAKER_00: There's no two ways about it.
• 24:29
  SPEAKER_01: One that's pretty good for Southeast Asia is the collaboration power.
• 24:35
  SPEAKER_01: that they put here.
• 24:35
  SPEAKER_01: I mean, Southeast Asia is not homogeneous.
• 24:41
  SPEAKER_01: It's a collection of a bunch of countries.
• 24:44
  SPEAKER_01: It is designed for figuring out a collaborative approach, partnerships.
• 24:52
  You have a number of different ecosystem players that can all
• 24:55
  play a role.
• 24:56
  SPEAKER_01: Whether you're talking about the hyperscalers,
• 24:58
  SPEAKER_01: local conglomerates,
• 25:00
  SPEAKER_01: agencies,
• 25:00
  SPEAKER_01: you got to play well with the different
• 25:02
  SPEAKER_01: governments and agencies and so on and so forth.
• 25:05
  SPEAKER_01: Especially if you're going for M&A,
• 25:06
  SPEAKER_01: you're thinking about create building ecosystems,
• 25:09
  SPEAKER_01: you're thinking about collaboration,
• 25:11
  not just purely on the acquisition in order to extract some
• 25:15
  more value out of that
• 25:17
  SPEAKER_01: activity.
• 25:18
  SPEAKER_00: networking in Southeast Asia may be a bit different.
• 25:21
  SPEAKER_00: I'm not saying that being on the other end of the world,
• 25:24
  SPEAKER_00: Silicon Valley is similar,
• 25:26
  SPEAKER_00: but at least in Southeast Asia,
• 25:28
  it's a bit different in the sense that there are people from
• 25:31
  different parts of the
• 25:32
  SPEAKER_00: region who have different cultural nuances,
• 25:36
  SPEAKER_00: not as similar as maybe in Silicon Valley whereby,
• 25:39
  SPEAKER_00: yeah,
• 25:39
  SPEAKER_00: things are still different given that it's a melting pot of cultures,
• 25:42
  SPEAKER_00: but in terms of Southeast Asia,
• 25:44
  SPEAKER_00: it's more
• 25:48
  SPEAKER_00: It's more explicit.
• 25:49
  It's more very obvious that there are differences in terms of
• 25:54
  culture,
• 25:55
  in terms of languages.
• 25:56
  SPEAKER_00: Like,
• 25:56
  SPEAKER_00: for example,
• 25:57
  SPEAKER_00: Thailand,
• 25:57
  SPEAKER_00: it's really quite hard to penetrate because of the language barrier.
• 26:01
  SPEAKER_00: Or Philippines, like you said, is the archipelago of islands.
• 26:04
  SPEAKER_00: So that's...
• 26:05
  SPEAKER_00: There's that operational inaccessibility in Indonesia as well.
• 26:09
  SPEAKER_00: Huge market, but again, not as robust in terms of regulations.
• 26:14
  SPEAKER_00: Surviving in Southeast Asia, it's still quite tricky.
• 26:18
  SPEAKER_00: Networking in that sense,
• 26:19
  SPEAKER_00: when you have a good,
• 26:20
  SPEAKER_00: when you've met someone who is really great,
• 26:23
  SPEAKER_00: you kind of have to leverage on that and then
• 26:26
  SPEAKER_00: Collaboration becomes powerful.
• 26:28
  SPEAKER_00: That's what at least I take from it.
• 26:29
  SPEAKER_00: And I think the next one would be the workforce for tomorrow.
• 26:34
  SPEAKER_00: Integration is a people sport.
• 26:36
  SPEAKER_00: So coming back to leadership again,
• 26:38
  a good leader means it's able to look from a point of view
• 26:41
  whereby they're able to
• 26:42
  SPEAKER_00: look at the big picture and integrate everything together.
• 26:45
  SPEAKER_00: you know, leadership also means it's a people game.
• 26:47
  So being able to have all that into one and being able to lead
• 26:51
  with some empathy,
• 26:53
  SPEAKER_00: you know,
• 26:54
  SPEAKER_00: being more human helps a lot because,
• 26:57
  SPEAKER_00: um,
• 26:59
  with AI coming into play,
• 27:01
  humanity having that heart in this day and age.
• 27:05
  SPEAKER_00: It's not as obvious as before.
• 27:06
  SPEAKER_00: You kind of have to put it out there in terms of connections.
• 27:10
  That's why there are so many networking activities right now
• 27:13
  whereby we're trying
• 27:14
  SPEAKER_00: to connect that human touch to technology,
• 27:16
  SPEAKER_00: which makes it more short of more meaningful.
• 27:19
  SPEAKER_00: Upskilling and culture are the hidden synergies for sure.
• 27:23
  And in C's multilingual,
• 27:25
  multi-rack environment,
• 27:27
  pretty much this is your bedrock.
• 27:29
  SPEAKER_00: Yeah.
• 27:34
  SPEAKER_01: So moving along,
• 27:36
  SPEAKER_01: over the next couple of years,
• 27:40
  I believe we're going to see an increase in M&A activity across
• 27:43
  Southeast Asia.
• 27:45
  SPEAKER_01: I think we can already see in the data that we're seeing an acceleration.
• 27:51
  SPEAKER_01: I think most of it still is coming cross-corder.
• 27:54
  SPEAKER_01: We're still seeing foreign players coming in,
• 27:56
  SPEAKER_01: acquiring their way into the region,
• 27:58
  SPEAKER_01: playing that playbook.
• 28:00
  We'll start seeing some of the local players over time start
• 28:05
  following this approach.
• 28:06
  SPEAKER_01: But in regards to the strategy and tactics,
• 28:09
  I think we're going to start seeing a lot more of this approach
• 28:13
  of transformation
• 28:16
  SPEAKER_01: focus becoming really a category of M&A activity,
• 28:24
  SPEAKER_01: which is
• 28:25
  building alongside the management,
• 28:28
  and you're going to see a whole crop of folks.
• 28:31
  SPEAKER_01: I mean,
• 28:31
  SPEAKER_01: there's always been M&A advisors and whatnot,
• 28:34
  but do the same way that we've started seeing AI transformation
• 28:38
  in all of this.
• 28:39
  We're going to see the similar sort of rhyme in regards to M&A
• 28:43
  style advisory being
• 28:45
  SPEAKER_01: built around digital transformation and kind of integration,
• 28:48
  SPEAKER_01: et cetera.
• 28:51
  SPEAKER_01: in the lens of this kind of approach.
• 28:53
  SPEAKER_00: And AI enabled M&A becomes table six.
• 28:56
  SPEAKER_00: It's integrated in almost every aspect of the M&A process.
• 29:00
  SPEAKER_00: It's even targeting diligence and synergy capture modeled near real time.
• 29:04
  Even on a day-to-day basis,
• 29:06
  when you do business development,
• 29:07
  you still need to use AI.
• 29:09
  So it's pretty much the same concept in terms when you use it
• 29:12
  in M&A as well.
• 29:14
  SPEAKER_00: You know, teams who don't, you kind of lose out on speed and accuracy.
• 29:18
  SPEAKER_00: The leading banks, operators already show the pattern.
• 29:21
  SPEAKER_00: JP Morgan has their own AI as well.
• 29:23
  SPEAKER_00: They've already do away with it.
• 29:25
  SPEAKER_00: And that's one way to look at it.
• 29:27
  SPEAKER_00: And as much as I want to say that AI is integral,
• 29:31
  but I don't think AI would replace jobs because you still need
• 29:35
  that human touch
• 29:36
  SPEAKER_00: anyway.
• 29:37
  SPEAKER_00: But the thing is,
• 29:39
  the winning point or the competitive advantage that someone
• 29:42
  would have over the
• 29:43
  SPEAKER_00: other is,
• 29:44
  SPEAKER_00: knowing how to use AI, particularly prompt engineering.
• 29:49
  That's so important because it saves so much time if you know
• 29:52
  the way to use it,
• 29:53
  SPEAKER_00: the right way to use it.
• 29:54
  SPEAKER_01: Yeah,
• 29:55
  SPEAKER_01: I mean,
• 29:56
  SPEAKER_01: just back on the AI enabled them,
• 29:58
  SPEAKER_01: I can tell you from my own standpoint,
• 30:01
  SPEAKER_01: the amount of automation and the investment process,
• 30:03
  SPEAKER_01: without a doubt,
• 30:04
  SPEAKER_01: it's always going to end up being there because a lot of the work,
• 30:08
  SPEAKER_01: but we're leading into this,
• 30:10
  SPEAKER_01: we're probably going to end up seeing that make an uptick
• 30:14
  SPEAKER_01: in the amount of deals that are able to get done as the analysis,
• 30:20
  SPEAKER_01: as the targeting,
• 30:21
  SPEAKER_01: as the specialization starts getting easier.
• 30:26
  and the integration thereof starts becoming easier because of
• 30:30
  some of these tooling.
• 30:32
  SPEAKER_01: And this maybe is a little bit further out of a prediction,
• 30:38
  SPEAKER_01: but as we have an ease of integration,
• 30:41
  SPEAKER_01: we should anticipate that there would be an increase of it.
• 30:44
  SPEAKER_01: So we'll probably see more
• 30:46
  uh of the programmatic emanate capital that where you have
• 30:50
  these corporates that
• 30:51
  just go on buying sprees uh maybe not the way that like ge back
• 30:55
  in the day when he
• 30:56
  just basically bought anything that he could get his fingers on
• 31:00
  um but in all
• 31:01
  honesty like when you look at like tech companies in the bay
• 31:04
  area i think google
• 31:06
  does like 100 acquisitions a year or at least they did that
• 31:09
  before the before the
• 31:11
  SPEAKER_01: competition committed the what was it the
• 31:14
  Federal Trade Commission there started blocking them and you
• 31:18
  started getting
• 31:18
  SPEAKER_01: regulators in the way.
• 31:20
  SPEAKER_01: But those companies are very programmatic with the way that they acquire.
• 31:27
  SPEAKER_01: And I would love to see some of that style,
• 31:30
  SPEAKER_01: maybe a little bit more measured approach,
• 31:32
  SPEAKER_01: looking at multi-deal transformational pools,
• 31:35
  SPEAKER_01: looking at understanding the dynamic of Southeast Asia,
• 31:38
  SPEAKER_01: market by market,
• 31:39
  SPEAKER_01: building up and being more programmatic with it.
• 31:43
  SPEAKER_00: Any companies that you're looking at?
• 31:45
  SPEAKER_01: You've seen players historically,
• 31:49
  like the right hailing was obviously the one which they did a
• 31:53
  bunch of different
• 31:54
  SPEAKER_01: acquisitions,
• 31:55
  SPEAKER_01: both Grab and Bochuk.
• 31:57
  But to be honest with you,
• 31:59
  that's not a super common strategy or playbook.
• 32:04
  SPEAKER_01: M&A is still not super common out here.
• 32:08
  SPEAKER_01: A lot of it just does not go down that road.
• 32:12
  SPEAKER_01: And so much of the M&A that we see falls into one of two buckets.
• 32:17
  SPEAKER_01: We see M&A that's very preemptive of super early teams.
• 32:21
  So we do see a lot of like series A level acquisitions in the
• 32:26
  sort of like sub 15,
• 32:28
  SPEAKER_01: sub 20 million dollar range.
• 32:30
  SPEAKER_01: A lot of which are happening at even lower valuations.
• 32:34
  SPEAKER_01: So we do see a lot of that.
• 32:36
  Anything above that range is generally coming from a foreign
• 32:39
  acquire where they're
• 32:40
  SPEAKER_01: basically buying their way into the region.
• 32:42
  SPEAKER_01: But it's not for a lack of capital.
• 32:44
  SPEAKER_01: It's not like the region lacks the capital.
• 32:46
  SPEAKER_01: It's not that the conglomerates lack the capital.
• 32:50
  SPEAKER_01: But there is definitely a blocker.
• 32:52
  SPEAKER_01: But I think over time we'll start seeing that shift.
• 32:56
  SPEAKER_01: The winds are turning.
• 32:57
  I think over time we're going to start seeing the local players
• 33:00
  realize that they
• 33:01
  SPEAKER_01: need to start getting in the game on the technology side.
• 33:04
  SPEAKER_01: And that M&A is probably going to be one of the drivers.
• 33:06
  SPEAKER_01: So I think that's going to tick up over,
• 33:08
  SPEAKER_01: say,
• 33:08
  SPEAKER_01: the next,
• 33:09
  SPEAKER_01: maybe a little bit longer term for the local players,
• 33:12
  SPEAKER_01: maybe five years,
• 33:13
  SPEAKER_01: three,
• 33:14
  SPEAKER_01: five.
• 33:14
  SPEAKER_00: Well, that's a long time in today's timelines.
• 33:20
  SPEAKER_00: But then again,
• 33:21
  SPEAKER_00: what would be,
• 33:21
  SPEAKER_00: you think,
• 33:22
  SPEAKER_00: the catalyst,
• 33:23
  SPEAKER_00: apart from what we have talked about,
• 33:25
  SPEAKER_00: the main,
• 33:25
  SPEAKER_00: one of the catalysts that would enable more M&As coming in,
• 33:31
  SPEAKER_00: apart from
• 33:32
  SPEAKER_01: Most of it just comes down to the competitive threat.
• 33:34
  I mean,
• 33:35
  for the most part,
• 33:36
  when you look around the region,
• 33:38
  people have these insular moats.
• 33:41
  You have a lot of concession economies where you are the de
• 33:45
  facto monopoly because
• 33:46
  SPEAKER_01: you are the sole one that has the permission to import Toyota.
• 33:50
  SPEAKER_01: Or you are the sole one that has the permission to do this activity.
• 33:56
  Or there's only three people that have permission to do the
• 34:00
  cross-border activity.
• 34:01
  uh truck freight or like you have a bunch of these sort of
• 34:06
  protected castles um but
• 34:10
  as as the region develops inevitably there's going to be more
• 34:15
  inter-region
• 34:16
  competition and the rest of the world is waking up to the
• 34:19
  potential of southeast
• 34:21
  asia so the competitive forces i think are going to end up
• 34:24
  pushing the hand
• 34:25
  I hope so too,
• 34:25
  because the thing in Southeast Asia,
• 34:27
  it's still very much relationship based.
• 34:29
  And there's so many family offices that I think it's one of the
• 34:32
  reasons why M&A
• 34:33
  SPEAKER_00: activity is not as happening,
• 34:36
  SPEAKER_00: because it's still family oriented to a certain extent.
• 34:40
  SPEAKER_00: So that's what I'm getting, at least from my understanding of the region.
• 34:44
  There's a number of the family businesses out and around the
• 34:47
  region that have
• 34:49
  SPEAKER_01: started to get picked up by private equity firms.
• 34:52
  SPEAKER_01: These are larger firms.
• 34:53
  SPEAKER_01: They're going to change the management.
• 34:55
  SPEAKER_01: They're going to change the culture.
• 34:56
  SPEAKER_01: They may end up over a little bit more of extended period of time.
• 35:01
  SPEAKER_01: Again, sticking with, I say, three to five for the local firms.
• 35:05
  You may end up seeing the fingerprints of these private equity
• 35:09
  players that are
• 35:10
  acquiring into these companies start changing the way that the
• 35:14
  dynamics are.
• 35:15
  SPEAKER_01: But it is true,
• 35:16
  SPEAKER_01: when you have many of these family-run businesses,
• 35:20
  they've historically always been on the traditional sort of
• 35:24
  approach because
• 35:25
  SPEAKER_01: they've always run this way.
• 35:27
  SPEAKER_01: When there are new businesses,
• 35:28
  they're usually being started by a family member and being
• 35:32
  folded up into the
• 35:34
  SPEAKER_01: overall family business.
• 35:37
  SPEAKER_01: It's always been more of a build and own as opposed to buy.
• 35:46
  which in all honesty carries more risk i mean there's no good
• 35:49
  data around on it but
• 35:51
  like when you go and have conversations with a lot of folks
• 35:54
  there's so there's so
• 35:55
  many sort of like lost their shirt doing this i don't like
• 35:58
  technology because we
• 35:59
  had this bad experience or like yeah there's there's a
• 36:02
  surprisingly large number of
• 36:04
  SPEAKER_01: bad experiences with them trying to go it alone but yet they still do
• 36:09
  SPEAKER_00: Yeah, and it doesn't help them, right, in the long run.
• 36:12
  SPEAKER_00: They lose out is what I'm saying.
• 36:15
  SPEAKER_00: As much as they are doing well now,
• 36:18
  SPEAKER_00: but the chances of them to keep up with the current trends,
• 36:23
  SPEAKER_00: they can't stay long where they are.
• 36:25
  SPEAKER_00: So let us wrap up.
• 36:26
  SPEAKER_00: Three reps to start building your...
• 36:29
  SPEAKER_00: transformer muscle, I'll start with them.
• 36:31
  SPEAKER_00: So the first one is five decision audit.
• 36:33
  SPEAKER_00: You know, label your last five big calls in defense and versus offense.
• 36:38
  SPEAKER_00: Do a chart.
• 36:38
  SPEAKER_00: I mean, if it's all in one column, rebalance this quarter.
• 36:42
  SPEAKER_00: Second would be live capability target list.
• 36:46
  SPEAKER_00: 10 companies, partners, tech that you buy, partner, or replicate.
• 36:49
  SPEAKER_00: Refresh monthly.
• 36:51
  SPEAKER_00: Treat it like a pipeline, not a wish list.
• 36:53
  SPEAKER_00: This is just a guide again.
• 36:54
  SPEAKER_00: Put transformation on the board agenda.
• 36:56
  SPEAKER_00: I think this is really important.
• 36:58
  SPEAKER_00: Three to five year capability map.
• 37:00
  Hopefully by then,
• 37:01
  the companies have already grown up where they are supposed to
• 37:05
  be.
• 37:05
  SPEAKER_00: And then M&A is really out there.
• 37:07
  SPEAKER_00: What's build versus buy versus collaborate by quarter?
• 37:12
  If anyone doesn't have like team members or people that are in
• 37:16
  charge of this,
• 37:17
  SPEAKER_01: I think most sophisticated organizations have a corp dev department.
• 37:23
  SPEAKER_01: And they're the ones that are basically doing these activities.
• 37:27
  So if you don't have someone,
• 37:28
  you need to think about who on your team should be doing this.
• 37:32
  SPEAKER_01: If you're an early stage startup, that's the founding team.
• 37:35
  SPEAKER_01: If you're a larger corporate,
• 37:36
  it means that you need the talent set to specifically focus on
• 37:39
  that because you're
• 37:40
  SPEAKER_01: talking much bigger.
• 37:41
  So that's how you protect and grow and you can scale faster and
• 37:46
  create more defensive moats.
• 37:49
  SPEAKER_00: And if this broker ideas, let us know.
• 37:51
  SPEAKER_00: I mean, you could DM us on LinkedIn.
• 37:53
  SPEAKER_00: We are reachable.
• 37:55
  SPEAKER_00: Watch our YouTube, leave a comment.
• 37:57
  SPEAKER_00: I mean, LinkedIn is the best way to reach us.
• 37:59
  SPEAKER_00: Tell us your best transform of your transect story if you have one.
• 38:03
  SPEAKER_00: Or if there's an example, drop us a comment, leave a text.
• 38:08
  SPEAKER_00: Slide into our DMs.
• 38:09
  SPEAKER_00: Whichever works best for you.
• 38:10
  SPEAKER_00: We just want more stories.
• 38:12
  SPEAKER_00: Subscribe on Spotify, Apple, YouTube.
• 38:17
  SPEAKER_00: We'll be back with more relevant stuff.
• 38:20
  SPEAKER_00: And transformation is in motion.
• 38:24
  SPEAKER_00: And this is the Sea of Startups.