Southeast Asian PE investors told the Hong Kong Venture Capital & Private Equity Association’s (HKVCA) Asia forum that they are expanding their playbooks for scaling portfolio companies, recognizing the effort as critical to generating interest among global buyers.

Rodney Muse, a managing partner at Navis Capital Partners, framed his firm’s focus on buyouts as a means of achieving scale through improved capacity to be aggressive and directive with companies in terms of M&A and cross-border expansions. That strategy has historically proven most feasible in Singapore and Malaysia. Now the opportunity is widening.

“The last of the core five economies that probably is now being addressed by buyout would be Indonesia and the Philippines. They’ve very often been viewed as minority markets or credit markets, but now you are seeing succession issues that are bringing buyouts to the fore,” Muse said. “So, we expect to be able to put more money to work going forward in those markets.”

Speaking of scaling opportunities on the venture end of the market, Shane Chesson, a partner at Openspace Ventures, noted that longstanding perceptions about the prohibitive difficulty of expanding start-ups regionally are fading.

Two-thirds of Openspace’s portfolio is either Singapore software, which Chesson compares to Israel’s start-up market in terms of ability to go global, or Indonesia, where GoTo, a super app and one of the firm’s early investees, is widely credited with proving the regionally active start-up opportunity set. Financial and healthcare technology are seen as the most prospective categories for cross-border growth.

An emerging means of achieving scale was also identified in consolidation plays that blend the region’s VC and PE ecosystems. Chesson observed that companies from traditional industries with substance in the form of access to customers and trust can be a good M&A match for start-ups with data and a more progressive business narrative.

“Within certain areas of tech investing, people came in too hard and too fast. They haven’t substantiated their business model. They were very sexy plays that got their funding and their people,” Chesson said. “Alongside that, there’s a lot of more bricks-and-mortar-oriented, less tech-forward companies that don’t necessarily have the excitement, but they have great underlying financials that can be combined with good tech that got ahead of itself in terms of funding and valuation.”

Buyouts-focused Tower Capital Asia is exploring this approach with Singapore’s AXS, a payments services provider set up in 2000 that operates a network of self-service kiosks as well as various mobile apps. Tower acquired the business from DBS Bank last year for an undisclosed sum, with a view to taking it into new segments and markets by absorbing innovative but less established players.

“We have a business that has substance but no narrative so right now we’re hunting for narratives and looking at acquiring some fintech start-ups,” said Danny Koh, Tower’s founder and CEO. “Previously [those start-ups] were raising money at USD 40m to USD 100m valuations. Now we can get 100% of the businesses for USD 4m to USD 10m. We’re in the midst of doing that. As a fund, we don’t actively look for restructuring type of businesses, but at a portfolio level, it makes sense.”