Pandemic hastening conglomerate break-up: Bain & Co

This is starting in Singapore, as conglomerates consolidate positions to become more focused

Published Sun, Oct 25, 2020 · 09:50 PM

Singapore

COVID-19 is hastening the break-up of conglomerates in South-east Asia, as these hefty multi-industry corporations look to "slim down" their organisational structures to overcome conglomerate discounts and underperformance relative to pure-play companies.

South-east Asian conglomerates averaged 24 per cent in annualised total shareholder return (TSR) from 2010 to 2013, according to a study by Bain & Company, beating pure-plays by six percentage points.

From 2014 to 2018, however, they underperformed pure-plays by a substantial six percentage points - with average annualised TSR of just 2 per cent.

Jean-Pierre Felenbok, managing partner of Bain & Company Southeast Asia, is not surprised that what used to be advantages of size, diversification and close government connections, which …