The factors that make South-east Asia’s top conglomerates stand out

BAIN & Company’s analysis of 177 South-east Asian conglomerates across two decades reveals an enormous performance gap.

The top quartile achieved a 20 per cent annualised total shareholder return between 2016 and 2025, while the average conglomerate managed just 4 per cent.

What separates top performers from others involves two factors: where they compete and, more importantly, how they transition into new sectors.

Moving into high-growth sectors seems like a straightforward path to expansion and yet, most conglomerates stall due to three compounding headwinds:

• A weak core and lack of direction: Out of the top-quartile conglomerates, 60 per cent hold a leadership position in their primary sector, higher than just 10 per cent in the bottom quartile.  Pivoting from a position of weakness is much harder than launching from strength. Cash flow, organisational bandwidth and credibility are all constrained, when the core is losing ground.

• Capability gaps: Operating in a new space often requires a different operating model, talent mix and market experience. Management capability and capital do not transfer seamlessly across sectors – knowledge is built only by operating in a market, not analysing it.

• A lack of capital discipline: Since 2003, South-east Asian conglomerates have doubled capital expenditure, while returns on capital have declined by nearly half. On average, conglomerates’ average return was 4 per cent, compared with 9 per cent for pure plays. In other words, conglomerates must invest more than twice the capital to generate the same profit growth. Committing capital at scale – before fully understanding what it takes to win – creates a serious structural disadvantage.

Unaddressed, these headwinds compound. A weak core limits risk capital; capability gaps delay market entry; and poor capital discipline leads to large bets without supporting evidence.

Start with what you already have

When the core is under pressure, most companies look outward at growing sectors and expanding profit pools.

Picking the right playing field is only part of the equation.

The more insightful interrogation is inward: Where do existing assets, relationships and strategic positioning give us a structural advantage that others cannot easily replicate?

Malaysian conglomerate Sunway’s transformation proves this point. The group reshaped from 13 business units to three core pillars by identifying where it could build genuine leadership.

Healthcare was not an obvious move for a property and construction group, but Sunway’s community reach, education and retail presence, and brand recognition gave it an enviable entry position a standalone investor would have paid a significant premium to acquire.

Similarly, a Philippine utility conglomerate expanded into the residential rooftop solar sector.

While many companies recognised the opportunity, the conglomerate benefited uniquely from decades of operations, household reach, financing partnerships and regulatory relationships.

These advantages rarely appear in a sector-attractiveness model.

They surface only when leaders ask the right question: Can our existing assets, relationships and ecosystem be leveraged into a real advantage in another market?

Examining internal operations identifies the areas in which advantages may exist. Direct market contact confirms whether they actually do.

Let the market inform the capability

Identifying advantages is the starting point, not the finish line. Entering a new market often requires capabilities that the parent organisation lacks.

Acquiring another company may seem like a shortcut to inherit the missing pieces, but it risks inheriting someone else’s flawed assumptions about how the market works.

An agricultural machinery manufacturer in Thailand faced this issue, when expanding from product sales to service-led farm solutions.

The new operating model needed to help farmers improve yields and manage costs, which requires fundamentally different customer relationships, revenue structure and talent from sales processes.

Instead of buying a services company, it used a structured venture process. Small teams engaged directly with farmers, testing service concepts and validating their willingness to pay, before committing significant capital.

The board approved the joint venture only after it demonstrated genuine customer pull and viable unit economics. In this case, the board did not approve a strategic thesis; it approved a business case earned through direct market engagement.

Scale capital alongside evidence

Most conglomerates ask an investment committee for funds before seeing market evidence. Leading conglomerates reverse that sequence, building quality evidence at every stage so they can earn capital.

The same Philippine conglomerate initially structured its solar venture as a small and separate entity with its own founding team, operating mode and metrics. It was funded to test a thesis, not prove it.

The parent doubled its investment only after the venture could confirm that its brand, household reach and financing partnerships translated into real customer traction.

Operating as a standalone entity preserved the venture’s speed, while maintaining the parent’s governance and discipline as it cleared investment milestones.

For the roughly 80 per cent of South-east Asian conglomerates that are family-controlled, staging capital against tested validation is critical to survival.

Incoming generations are setting 20-year transformation agendas which cannot stand on ambition alone.

The challenge is execution

Every conglomerate’s leadership team in South-east Asia can point to attractive sectors.

Opportunity is never the constraint. The real challenge is converting directional clarity into a competitive venture, without overcommitting capital against unvalidated assumptions.

Michael Egan is a partner and head of the Asia-Pacific Innovation and Business Building solution at Bain & Company, based in Bangkok. Rahul Nair is an associate partner at Bain & Company, based in Singapore.