COVID-19 crisis set to spur M&A in SE Asia, says Golden Gate’s Lauria

A new coronavirus visual model. Photo: Unsplash

The COVID-19 crisis is set to spur a round of mergers and acquisitions as startups begin to see the impact of the global pandemic on their cashflows, Vinnie Lauria, a managing partner at venture capital firm Golden Gate Ventures, said Tuesday.

“There’s going to be a few entities with a lot of cash, like the Gojeks of the world, Tokopedia, Traveloka,” Lauria said during a webinar hosted by the Southeast Asia-focused venture capital firm.

“There’s going to be a whole bunch of entities that will have trouble raising money, and this is an opportune time for those large unicorns to do consolidation on the cheap. So I do think we’ll actually see a lot of M&A and that is probably where we’ll see valuations come down quite a bit,” he added.

Lauria’s comments come as many startups across Southeast Asia are facing tough times as the virus – which has infected more than 300,000 globally, killing nearly 15,000 – takes a bite out of many companies’ cashflows as well as their ability to close deals with investors.

“If companies are facing a financing crunch and have a lot of uncertainty to make it through the end of the year, then acquisition would be your next turn,” he said. “The reality is, it’s kind of a forced sell.”

Chris Tran, a partner at North Ridge Partners, said the M&A drive in the region predated the COVID-19 virus, with the US-China trade war a major driver.

North Ridge Partners, a joint venture between its management team and Australian family office Victor Smorgon Group, is an investment bank that invests in and advises Asian technology companies.

“We had several Chinese bidders that were actually setting up offices in the US and then scouting both Southeast Asia and India,” Tran said during the same webinar. “And then actually, funnily enough from India, we see some interesting startups looking at acquisition opportunities in Southeast Asia.”

He said those deals would likely come in around $50 million or above.

Tran added that consolidation makes a lot of sense as Southeast Asia lacks regional giants.

“There are specific pockets of money that are available for larger check sizes,” he said. “There are pockets in Series C-Series D, strategics that want to deploy that bigger check size in something more meaningful.”

Tran said his firm has been talking with investors who are seeking opportunities amid the crisis and it is encouraging for the ecosystem that exit negotiations are still taking place.

In the current environment, startup valuations have become more reasonable, with the drop in public stock markets often providing a metric for unlisted counterparts’ valuations, he added.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.