Korean banks urged to pur­sue M&As in SE Asia

Bain’s Asia Pa­cific head says Korea has ‘raw ma­te­rial to be great in­no­va­tor’

The Korea Times - - INTERVIEW - By Park Jae-hyuk [email protected]­re­atimes.co.kr

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.

Cour­tesy of Bain & Com­pany

Satish Shankar, re­gional man­ag­ing part­ner of Bain & Com­pany Asia-Pa­cific

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