Press release

14 Jul 2022 Singapore, SG

EY-Parthenon study: Companies in Southeast Asia that undertake transformative actions during the COVID-19 pandemic outperformed peers

Companies that proactively undertook transformative actions as they worked toward riding through the disruptive impact of the COVID-19 pandemic saw outperformance by 13 percentage points (pp) based on total shareholder returns (TSR), as compared to reactive transformers.

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Companies that proactively undertook transformative actions as they worked toward riding through the disruptive impact of the COVID-19 pandemic saw outperformance by 13 percentage points (pp) based on total shareholder returns (TSR), as compared to reactive transformers. Transformative actions can include but are not limited to environmental, social and governance initiatives, digital transformation, supply chain management and portfolio Optimization1.

This is according to a recent EY-Parthenon report, Transformation in Southeast Asia: Four archetypes of outperformers, which studied the top 70 listed companies by market capitalization across seven sectors – advanced manufacturing and mobility, consumer products and retail, energy and utilities, financial services, health care, real estate and technology, media and telecommunications – in Southeast Asia (SEA, comprising Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam), and reviewed their performance between 2018 and 2021.

Sriram Changali, EY Asean Value Creation Leader, says:

“During the pandemic, businesses scrambled to adapt to the new normal, and drew up crisis management strategies to respond to an alphabet soup of possible recovery trajectories. Yet, many of these transformation actions have not translated into value creation for the companies. Hence, it is important for companies to understand how their transformation approaches and their execution impact the success of their transformation journey and enhance the value of their organization.”

Angela Ee, EY Asean and Singapore Restructuring Leader, adds:

“There is no one single transformative approach that companies should look to. Instead, it can be a multitude or combination of approaches, which include acquisitions, digitalization or even divestments and restructuring, to help optimize the value of the business.”

Transformation approach impacts business performance

The EY-Parthenon study found possible correlations between the companies’ performance and their transformation approaches. The study also identified four types of transformation actions that led to the companies’ outperformance relative to peers.

Proactive transformers

Companies that undertake transformation even when they are already outperforming against the industry are considered proactive transformers, while companies that undertake transformation when they were underperforming against the industry are considered reactive transformers. The EY-Parthenon report highlights that in the periods following transformation, proactive transformers in SEA saw a 13pp outperformance on TSR compared to reactive peers.

Serial transactors

Serial transactors are a subset of proactive transformers, and they transact – i.e., acquire or divest – more than reactive companies. The EY-Parthenon study found that proactive transformers who are serial transactors in SEA transacted more than their reactive peers by 13% between 2018 and 2021 and were 23% more active during the economic slowdown in 2021. Historical evidence also suggests that transactors had a 25% increase in TSR over non-transactors in the period after the global financial crisis.

Active investors

Active investors are companies that invest more, which is reflected in their TSR outperformance. The EY-Parthenon study highlighted that companies that outperformed the industry in the years following their transformation also consistently had a higher investment rate compared to their counterparts. The outperformers have, on average, a 17% higher capital expenditure spending as indicated by their capex-to-sales ratio, compared to their underperforming peers in the period before and during the pandemic.

Holistic transformers

The companies covered in the EY-Parthenon study undertook transformation on multiple fronts: over 90% pursued ESG initiatives; 83% invested in digitalization, while 51% invested in supply chain management.

However, the study also found that companies gave little attention to the key levers of transformation, including balance sheet and financial restructuring.

Changali says: 

“Initiatives such as digital transformation are typically expensive, with unclear business cases that some boards may struggle to navigate. It is critical that such initiatives are combined with cash release through cost optimization, working capital optimization and financial restructuring.”

Five imperatives to successful transformation

The EY-Parthenon study also highlighted that execution would determine the success of the transformation initiative. There are five imperatives that companies should note when undertaking any transformative actions:

  • Align CEO and board on the purpose of the transformation and the value for the organization
  • Set aspirational targets and incentivize success over and above what is available in a business-as-usual setting that aligns with the objective of transformation and linked to clear outcomes
  • Set up execution rigor and get commitment from the top is crucial to maintaining accountability
  • Calibrate the journey to balance the costs with the potential upsides and communicate with key stakeholders along the journey.
  • Build capabilities to improve functional, technical and leadership expertise and equip employees with the right tools.

Ee concludes:

“Transformation is not just for companies in distress. We see that companies that have been resilient during the pandemic have also undertaken transformative actions that helped to position them for long-term success. Transformation via business restructuring — be it an operational turnaround or a financial restructuring — can be a vital tool to preserve value for a company and its stakeholders. From refinancing and cashflow improvements, to the divestment of assets and management of liabilities, there are numerous ways that executives can maintain or create value in their organization. Hence, when undertaking a transformation project, companies should not discount restructuring, which can be a way to turn adversity into opportunity.”


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    1. Other form of transformative actions can include human resource optimization, marketing spend reduction, financial restructuring, mergers and acquisitions (M&A), and partnership or collaboration.