The series commenced with an introduction detailing how ETA enables ambitious professionals to transition from corporate careers to business ownership while mitigating typical “startup” risks.

Part 1 introduced the model’s US origins in the 1980s and its recent arrival in SEA. Part 2 examined why SEA’s Small and Medium Enterprise (SME) sector is primed for ETA, focusing on the impending inter-generational transfer of family assets. Part 3 mapped the key players: searchers, operators, investors, and ecosystem players.

In this concluding instalment, we analyse the existing gaps within the ETA ecosystem that hinder its broader adoption as an asset class and outline the specific initiatives we are undertaking to cultivate an ETA ecosystem uniquely tailored to the SEA context.

Overcoming headwinds: Addressing key obstacles to ETA adoption

The micro-to-small cap sector’s M&A process in SEA faces friction points uncommon in mature markets, ranging from fundraising and due diligence to securing debt capital and legal documentation. 

• Lack of familiarity and education: SME owners are largely unaware of the operator-led acquisition model, defaulting to family handover or sale to a strategic player or a private equity firm. Over-explaining ETA frameworks doesn’t help either, as a lack of local, successful case studies breeds skepticism in low-trust environments such as across the emerging markets in the region. 
• Thin and conservative investor ecosystem: The local investor base remains unfamiliar with the search fund model’s unique risk-return profile. Investors favour “sexy” industries such as AI or fintech despite their much, much higher risk profile, while overlooking profitable but “boring” businesses that search funds target.
• Cultural preferences and trust deficit: SEA business landscape is highly relational. Founders’ strong emotional attachment to their legacy and prefer family succession. Building trust then requires a multi-year effort, running counter to the transactional nature of M&A. A typical two-year search period in a traditional search fund is often insufficient to build that profound level of trust with business owners. 
• Operational and diligence complexity: Due diligence is made complicated by non-standardised financial reporting, reliance on cash transactions (although this is rapidly changing with the use of e-wallets and e-invoicing), the use of multiple financial books, mixing personal and business expenses and business practices reliant on informal local relationships or regulatory “shortcuts.”
• Valuation gaps and structural challenges: Sellers’ emotionally-driven valuation expectations often exceed usual market multiples in the micro-to-small cap segment. Selling at lower-than-expected values is seen as “losing face”, and owners would rather shut down their businesses than be seen as a laughing stock among their peers for selling cheaply. Typical M&A structures like earn-outs and seller financing are less accepted as compared to Western markets.
• Lack of acquisition financing: Banks, while familiar with mainstream products like term loans, are hesitant with more complex acquisition financing. Further, banks’ typical requirement of a personal guarantee is incompatible with the ETA’s professionalised ownership and management structure.

Also Read: The new succession: Charting the rise of Entrepreneurship Through Acquisition (ETA) in SEA – Part 1

The growth blueprint: Essential pillars for ecosystem development

ETA represents an emergent and untested asset class within the region. This raises a critical question: is it merely a Silicon Valley import, echoing the regional replication of venture capital a decade or more ago, or does it offer genuine innovation capable of resolving the SME succession crisis in SEA? The distinction hinges on our ability to overcome the identified challenges, which demands a coordinated and multi-faceted strategy. Achieving a mature ETA market in this region necessitates the development of four fundamental pillars.

• Education and evangelism: The foremost priority is to educate all interested parties. This necessitates a proactive effort to promote the ETA model to SME owners, illustrating its value as a practical and attractive succession option that protects their company’s heritage. It also involves informing highly entrepreneurial mid-career professionals about ETA as an alternative to launching a startup. Finally, it requires building the right narratives with potential investors and private credit providers about the workings and historical risk-adjusted returns of this investment category. Regional government agencies such as Enterprise Singapore are examining how ETA can solve the succession challenges amongst SMEs they support.
• Building institutional knowledge through success stories: Nothing fosters ecosystem confidence more effectively than demonstrable success. Every successful search, acquisition, and eventual sale in the region will act as a strong proof point, generating momentum for the entire ecosystem. Local case studies are vital for validating the model in the eyes of cautious sellers and for attracting more capital and operational talents into the ecosystem. Therefore, publishing these success stories, ideally with the support of higher education institutions like INSEAD and SMU, is a crucial task for early participants to establish the foundation for the industry’s eventual success.
• Developing professional intermediaries and standardised processes: A mature M&A market depends on a network of experienced intermediaries, including sell-side advisors, lawyers, and accountants, who grasp the unique requirements of search fund transactions. The service quality of these intermediaries can vary widely, ultimately affecting transaction success rates. Furthermore, creating industry-wide approved standard templates and best practices for critical components such as confidential information memorandums formats, data rooms, and deal structures can significantly lower transaction hurdles, speed up search timelines, and reduce costs for everyone involved.
• Cultivating a dedicated and patient investor base: The ecosystem requires a committed pool of capital that understands and accepts the long-term, patient nature of SME investment. This involves nurturing a community of local and international investors willing to provide not only financial support but also essential mentorship and governance. This is a considerable challenge, as the region’s capital markets have been hindered by a lack of successful exits stemming from a period of capital misallocation in the venture capital industry.

The critical factor for unlocking the growth in ETA in SEA is ultimately not capital, but trust. The primary obstacles in the region, seller hesitation, investor conservatism, lack of high-quality operators, and deeply ingrained cultural preferences, are fundamentally rooted in issues of trust, rather than finance. Therefore, the most effective strategies for growth are essentially mechanisms for cultivating this necessary trust.

Also Read: The new succession: Charting the rise of Entrepreneurship Through Acquisition (ETA) in SEA – Part 2

In contrast to Western markets, where M&A is often a highly transactional process, a strong, pre-existing relationship frequently serves as the foundation for a deal in a trust-deficient SEA. This suggests that the most successful acquirers and builders must prioritise being trusted educators and advisors, with dealmaking being a parallel function. While this relationship-intensive approach may result in a more gradual pace of market expansion, it will establish a more resilient, culturally relevant, and sustainable foundation for long-term success.

GenCap’s approach to ETA in Southeast Asia

Within Southeast Asia’s still-nascent ETA landscape, Gen Capital Partners’ (GenCap) model is designed around the region’s specific operating realities. As co-founder alongside Eric Koh, I established GenCap to pair a Searcher, responsible for M&A, finance, sourcing, and diligence, with an Operator focused on operations, growth, and organisation from the outset. This structure creates a clear division of labour that spans the full ETA process.

Early collaboration allows investors to evaluate a management team rather than a single individual. Post-acquisition, the Searcher typically oversees finance and corporate development, while the Operator assumes the CEO role. The model is intended to shorten parts of the search process by combining the Searcher’s relationship-building across the deal ecosystem with the Operator’s domain and operating experience.

In a relationship-driven Southeast Asian context, this approach seeks to address common challenges faced by solo searchers, including key-person risk and credibility gaps. Pairing financial and operational capabilities upfront is designed to establish trust with both investors and selling founders, particularly in founder-led SME transitions.

Beyond executing acquisitions, GenCap is also involved in broader ETA ecosystem development, including participation in educational initiatives and efforts toward more standardised approaches to ETA in the region. Through collaborations with regional platforms and engagement with investor, operator, and searcher networks, the firm’s activities contribute to greater familiarity with the ETA model and its application within Southeast Asia.

Also Read: The new succession: Charting the rise of Entrepreneurship Through Acquisition (ETA) in SEA – Part 3

Conclusion

The ETA model is a transformative, de-risked alternative to traditional entrepreneurship, now imperative for SEA. The region faces a critical juncture: SMEs dominate the economy but are simultaneously threatened by an accelerating business succession crisis as founders retire. This creates a vast market of healthy businesses needing new leadership.

This capital gap, the ‘missing middle’ of underserved SMEs, requires sophisticated management and structured capital that traditional financing can’t provide. While nascent, the ETA ecosystem is building momentum in hubs like Singapore, Thailand and Malaysia, backed by dedicated investors. Growth requires concerted efforts in education, celebrating local successes, building professional infrastructure, and cultivating trust.

For high-potential entrepreneurs, this means a direct path to CEO roles. For investors, access to a high-potential asset class. Most importantly, it provides SEA with a sustainable, market-driven solution: ensuring the legacies of retiring founders become platforms for the next generation’s growth. The era of ETA in SEA has begun.

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