Interview with DENZAI Holdings Inc.
Construction company | Japan

DENZAI Holdings Inc. (Hokkaido)

M&A Case Interview

Buyer
Company Name: DENZAI Holdings Inc. (Hokkaido Prefecture)
Busines: Large-scale renovation work of plants, social infrastructure construction such as dams, etc.
Net sales: Approx. 15 billion JPY (FYE March 2022)
Number of employees: Approx. 950 (FYE March 2022)
Seller
Company name: Huationg Holdings Pte. Ltd. (Singapore)
Business: Harbor transportation, crane construction, crane-related equipment rental, etc.
Sales: Approx. 4.2 billion JPY (FY 2018/12/consolidated basis)
Number of employees: Approx. 600 (FY 2018/12/consolidated basis)
Read the seller's interview

* Information at the time of execution of M&A

DENZAI has met with an indispensable company to accelerate our business expansion into the South Asian region.

DENZAI Holdings Inc. is the second-largest crane company in Japan, headquartered in Muroran City, Hokkaido. Since its establishment in 2015, the Company has promoted nationwide expansion and grown to 15 billion JPY in sales (FYE March 2022). The driving forces behind this were “overseas”, “M&A”, and “wind power generation”. We asked Mr. Kohki Uemura, COO, about DENZAI’s growth strategy.

In recent years, DENZAI has focused on the construction of wind power plants as a target for construction.
In recent years, DENZAI has focused on the construction of wind power plants as a target for construction.

M&A with Huationg Holdings Pte Ltd is essential to accelerate realization of DENZAI’s vision.

In 2020, you acquired Huationg Holdings Pte Ltd in Singapore (“Huationg”), and you have been actively involved in M&A as part of your growth strategy.

Mr. Uemura from DENZAI Holdings Inc. :
Until now, we has been strategically incorporating M&A with an emphasis on area strategies.
There are many small and medium-sized companies in the crane industry, and large capital investment in cranes and human resources are important. Thus, the benefits of expanding scale through M&A are very significant. We have partnered with crane companies from different regions to share the cranes and human resources owned by each company, thereby reducing costs and increasing productivity.

You are also aggressive in expanding into overseas markets.

Mr. Uemura:
In recent years, our company have been focusing on the construction of wind power plants. The trend toward decarbonization has led to a worldwide rush to build power plants. Therefore, we first entered Taiwan in 2019. This is because Taiwan was one of the first countries in the Asia-Pacific region to develop large-scale offshore wind power generation. Thankfully, the subsidiary established in Taiwan recorded sales of 1.6 billion JPY in 2020.
Considering that the development of wind power generation will continue to advance outside of Taiwan in the future, we felt it was imperative to secure human resources and equipment, and we were looking for a partner in the same industry to help us gain a foothold in expanding our overseas business.

That is when Nihon M&A Center decided to support you, and matched you with Huationg. What attracted you to Huationg?

Mr. Uemura:
We have acquired a number of companies so far, and what is important to us when deciding on a partner company is whether or not it can generate strong synergies. Huationg was Singapore's top five crane company and had solid business relationship with major companies and government-affiliated companies. We have nearly 500 global human resources who are fluent in English, and we thought that we could push forward with overseas expansion as one of our future growth strategies.

Negotiations began in earnest at the beginning of 2020, and just when you were close to reaching an agreement, the new coronavirus (COVID-19) became a pandemic.

Mr. Uemura:
Yes. Huationg and its business performance was also impacted by COVID 19 instead of its business performance deteriorated. We were very torn about whether to proceed, but finally decided on M&A in light of Huationg's corporate valuation and future potential. We have a long-term vision of achieving sales 35 billion JPY by 2030, so the M&A with Huationg was indispensable for accelerating the realization of the vision.

Aiming for synergies between Huationg's abundant management resources and DENZAI’s high engineering capabilities.
Aiming for synergies between Huationg's abundant management resources and DENZAI’s high engineering capabilities.

I believe that you must have been anxious to proceed with the negotiations, given the restrictions on overseas travel due to COVID-19. How did Nihon M&A Center respond?

Mr. Uemura:
We asked Nihon M&A Center to be persistent in the negotiations. By having Nihon M&A Center come in as an advisor, we believe we were able to accurately convey our thoughts. In addition, Nihon M&A Center conveyed Huationg that Huationg is necessary for out Group’s growth strategy, and I believe that Huationg clearly convinced of the significance of this M&A.

With less and less room for organic growth
M&A will undoubtedly become a necessity.

The final contract was signed in December 2020. What were your subsequent considerations as you worked through the PMI (post-merger integration)?

Mr. Uemura:
The most important thing is to share our vision. To do so, we frequently have real communication with Huationg’s employees. In doing so, it does not work from the top down. It is important to treat others with respect.
Currently, we are establishing a subsidiary in India. With the establishment of a base in Singapore called Huationg, we plan to accelerate our expansion not only into Southeast Asia but into the South Asian region as well. In the future,
Huationg is envisioned to become a global HQ that supervises overseas subsidiaries.

Employees in more than 20 countries support the business and deliver services worldwide.
Employees in more than 20 countries support the business and deliver services worldwide.

You continue to be active in domestic M&A.

Kamimura:
In May 2021, we acquired Kawabata Juki Kogyo, which boasts the largest number of cranes owned in Hachinohe, Aomori Prefecture. Since then, we have continued to conduct M&A with Kashima Crane (Fukushima, 2021), Sawada Unyu Kensetsu (Hyogo, 2022), and Itou Juki Kogyo (Toyama, 2022).

With the declining birthrates, population ageing, and population decline, there is less room for growth on a stand-alone basis. M&A will continue to be necessary for Japanese companies to grow.
We would also like to realize a growth strategy that takes advantage of economies of scale by partnering with crane companies that have strengths in their respective regions.

(Left) Mr. Lee Chin Tiong (Founder), Huationg Holdings Pte. Ltd. (Right) Mr. Kohki Uemura (COO), DENZAI Holdings Inc.
(Left) Mr. Lee Chin Tiong (Founder), Huationg Holdings Pte. Ltd.
(Right) Mr. Kohki Uemura (COO), DENZAI Holdings Inc.
(Title at time of M&A)

Nihon M&A Center Representative’s Comment

For Japanese mid-sized companies, overseas expansion has the potential to significantly grow their own group, but there are some situations where it is difficult to go it alone. This time, DENZAI has partnered with a top five company in Singapore through M&A, accelerating their overseas expansion at a rapid pace. I felt that “respect between two companies” and “shared vision” were behind the success of the M&A. I look forward to more and more synergies between the two companies in the near future.

※Title at the time of interview
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