Korean banks urged to pursue M&As in SE Asia
Bain’s Asia Pacific head says Korea has ‘raw material to be great innovator’
Korean financial companies should seek to sign more M&A deals in Southeast Asia to strengthen their foothold there and overcome competition from their Chinese and Japanese rivals, according to the Asia-Pacific head of one of the world’s top three business consultancies.
Satish Shankar, regional managing partner for Bain & Company’s operation in the Asia-Pacific, told The Korea Times that financial services is one area where Korean businesses in Southeast Asia can seek more opportunities.
“Korea has been very good in banking and financial services through omni-channels which is to offer customers the ability to both walk into branches and do online banking,” he said during a recent interview at the consulting firm’s Seoul office.
“And if they can bring in leading edge technologies and find a differentiated business model to compete with low asset intensity, I think that could be a very successful approach.”
Shankar, who started leading Bain’s business across the region in April, has also been serving as head of the firm’s Southeast Asian operation over the past five years.
Based on his 22 years of experience with Bain, the veteran consultant said a bright future is awaiting Korean financial companies that have made inroads into the Southeast Asian market, looking for new income sources.
“To me, both India and Southeast Asia are very interesting, attractive destinations. Both regions are growing at 5 percent plus per annum,” Shankar said.
“I also would say Korean companies are very seasoned investors and very successful investors in the region. Many of the Korean companies have been large businesses, quite localized businesses in these markets.”
As an expert in Bain’s M&A practices, he advised Korean financial companies to consider using M&As when trying to win the hearts and minds of customers in the unfamiliar Southeast Asia.
“M&A can be an attractive part, as opposed to a green field, because when you’re doing green field, you don’t know the market, you’re new to the market and you’re building a proposition which you’re not sure about,” he said.
“In many countries, I’d like to take Indonesia, there is a window of opportunity. Their financial services sector is fragmented. There is inevitably going to be a consolidation. In fact a few companies have already made themselves available for sale. If you buy the right target, you can use that as a base to scale up the business.”
Shankar, however, emphasized it was more important for Korean firms to focus on their core businesses that they know well.
“You could basically use M&A in a smart and powerful way to build business. But again, I’ll go back to some of the principles that are laid out, which is, you’ve got to understand the business,” he said.
“You’ve got to do something that you know well, and you’ve got to buy an attractive target, as opposed to any company that’s available.”
He said if Korean firms use the right strategies, there is no reason why many world-class Korean companies cannot be just as successful as their Japanese or Chinese competitors, which have already settled in the Southeast Asian market.
Rediscover founders’ mentality
During the interview, the consultant also gave advice on the Korean market which is suffering declining growth, unlike emerging Southeast Asian markets.
“To me, the challenge for Korea is to move from being a very fast, very effective follower to an innovator,” Shankar said.
“When I look at Korea, I think Korea has some of the raw material to be a great innovator. So when I look at things like R&D spending as percentage of GDP, Korea has more than 4 percent plus, and that’s compared with Israel. Israel and Korea are the highest in the world in terms of R&D spending as a percentage of GDP.”
According to the Bain partner, what Korean firms need to rediscover is the founders’ mentality.
“Koreans built some world-class businesses after the Second World War,” he said.
“There have been world-class global businesses with hundreds of billions of dollars of market capital. Korea has a history of that, and I think with some of these founder-led companies, they should rediscover their founders’ mentality.”
Mentioning the creation of a vibrant ecosystem for entrepreneurship as another opportunity that Korea needs, the new Asia-Pacific head of Bain promised his company will support Korean and other Asian firms to become innovators.
“When I look at consulting in this part of the world, in APAC, including Korea, consulting penetration is relatively low, compared to North America, Germany or other parts of Europe,” he said.
“We have a significant opportunity to support companies in doing things that are new to the company, but where we have a fair bit of experience.”
Shankar also said he is excited about the opportunity of supporting big Asian companies in accelerating their global push to be global players and teaching them the best practices from across the world.
Korea has been very good in banking and financial services through omni-channels.
Satish Shankar, regional managing partner of Bain & Company Asia-Pacific