Even as Southeast Asian companies are pursuing M&A to accelerate growth, now may be the time to seize the opportunity to restructure to focus on the business and reduce costs while they still have strong balance sheets. This could also present an opportunity for them to shed lesser-performing business units and acquire relevant assets and capabilities. The macroeconomic headwinds are real, yet we are still waiting for Southeast Asian companies to readjust accordingly.
Digital and technology imperative drives investment activity
The search for technology and talent is driving deals as 45% of Southeast Asian respondents (versus 65% globally) say they plan to allocate more than 25% of their total investment capital to technology, with a predominant focus on solutions that drive top-line growth. More than half of executives (52% versus 56% globally) will invest in technology through acquisition, joint ventures or external venture funds.
At the same time, more than two-thirds of respondents (67% versus 61% globally) are experiencing difficulties securing the right skills and talent. In particular, companies face the biggest challenge with hiring or retaining talent with specific technical skills relevant to the core business (26% versus 37% globally).
Yet although Southeast Asian companies, like their global counterparts, acknowledge the opportunities and threats of digital disruption, there is no clear consensus on the approach or the level of change required. Currently, the push is mostly around productivity enhancements, but fundamental strategic shifts have yet to come. As the pace of digital and technology continues to accelerate, Southeast Asian companies need to be rethinking operating models and pushing to create transformed or new true digital businesses.