Pure-play firms now outperforming conglomerates–study
Southeast Asia’s sprawling conglomerates—long considered dominant corporate forces in the region—are facing a turning point as returns fall behind those of more focused companies, according to a research note by global consultancy Bain & Company.
Bain said the study found that diversified business groups have delivered weaker total shareholder returns (TSR) than pure-play companies in recent years, marking a reversal of an earlier trend when conglomerates outperformed their more specialized peers.
Between 2016 and 2025, conglomerates in Southeast Asia posted an average annual TSR of about 4 percent, trailing pure-play firms by roughly 5 percentage points, Bain said. This reflects a broader erosion of the conglomerate model’s traditional advantages, such as privileged access to capital, talent and policymakers.
But the research also revealed a widening gap within the sector itself. A select group of top-performing conglomerates significantly outpaced their peers, delivering around 20 percent annualized TSR over the same period.
These standout companies demonstrate that strong performance remains possible if conglomerates adapt their strategies.
Bain noted that conglomerates have faced mounting challenges in recent years, including slower economic growth in Southeast Asia, leadership succession in family-controlled firms and the declining relevance of traditional conglomerate advantages.
Across Southeast Asia
Bain’s analysis—covering 177 conglomerates and 347 pure-play companies in the region since 2003—identified four key transformation pathways for conglomerates seeking to remain competitive.
First is the need to maximize core business value. Many conglomerates operate across multiple industries, which can dilute management focus.
Successful groups, Bain said, typically concentrate on sectors where they can achieve clear industry leadership while enforcing strict cost discipline and productivity improvements.
Second, conglomerates must manage their portfolios more actively, reallocating capital toward higher-growth industries, such as technology, health care and financial services, while scaling back exposure to slower-growing sectors.
Top-performing companies often reshape their portfolios through acquisitions, divestments and strategic investments.
The third priority is optimizing capital structures. Investors often apply a “conglomerate discount” to diversified groups due to perceived complexity and weak synergies among business units.
Bain estimates that Southeast Asian conglomerates traded at an average valuation discount of about 32 percent between 2022 and 2025, compared with the sum of their individual business units.
Finally, conglomerates must transform their operating models by redefining the role of the corporate center.
Many successful groups are shifting toward an “active investor” model, where a lean headquarters focuses on capital allocation and portfolio strategy, while business units retain operational autonomy.
Family-controlled conglomerates remain a dominant force in the region, accounting for roughly 80 percent of Southeast Asian groups, Bain added. Historically, these companies have delivered TSR about 5 to 6 percentage points higher than their nonfamily counterparts.
Still, Bain warned that the next generation of leaders must rethink traditional governance and operating structures to sustain performance.
“Reinvent or risk falling further behind,” the study concluded, noting that transformation across strategy, portfolio management, capital structure and governance will determine which conglomerates thrive in the region’s next phase of growth.
