Interview with Huationg Holdings Pte. Ltd.
Construction company | Singapore

DENZAI Holdings Inc. (Hokkaido)

M&A Case Interview

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)
Read the seller's interview
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)

* Information at the time of execution of M&A

M&A as a growth strategy enabled us to make overseas deals one after the other.

Huationg Holdings Pte. Ltd. (“Huationg”) is a Singapore-based company that has been mainly involved in the crane business and heavy goods transportation business for more than 30 years since its establishment. The crane business accounts for 60% of sales, and both businesses are among the top five in Singapore. The company is well known in the construction industry in Singapore, so what was the reason for the M&A decision?

Huationg has been in business for more than 30 years.
Huationg has been in business for more than 30 years.

For employees’ happiness, M&A was the solution to expand the oversea business and resolve the succession issue

What was the background to your decision to make this M&A decision?

Huationg Holdings Pte. Ltd. Mr. Lee:
The reasons to pursue M&A were “growth strategy” and “business succession”.

Our services, which are crane business and heavy goods transportation business, are used at the site of new infrastructure construction and petrochemical plant maintenance. However, due to the global decarbonization trend in recent years, future growth has become uncertain, and a new management strategy became required. Therefore, we sought a way out in the overseas market. We drew up a “growth strategy” to expand our business globally for the near future, with Singapore as our base. We had another issue of “business succession”. I turned 63 years old and was thinking about retiring by and by, but I didn't have a successor. In addition, I had health concerns, and my daily work was becoming more and more burdensome. I assumed that the business succession issue would arise sooner or later and setting a course in advance was a better way rather than rushing to deal with it when the time comes. M&A was the means to fulfil these two objectives.

Did you have any concerns when looking for a partner company?

Mr. Lee:
I was concerned about the employees. All of them have been with us for a long time, and I have attended them like family. I was worried about how this family-like corporate culture would change when a large company became a shareholder. That is why I provided following three conditions for the partner company.

1. A company that has a solid understanding of our business
2. A company that understands our corporate culture and has a smiler culture with our company
3. A company that we can feel a sense of security that they look after our employees

Huationg owns more than 500 pieces of heavy machinery and employs more than 500 people
Huationg owns more than 500 pieces of heavy machinery and employs more than 500 people

Afterwards Denzai Holdings Co., Ltd. (Denzai), a Japanese company, was introduced by Nihon M&A Center. What was your impression when you met them?

Mr. Lee:
I had a good impression. Since we were both working for crane companies, they understood our business thoroughly, and I felt that their corporate culture is close to ours as their company is also run by founding president. In addition, Denzai has been focusing on the construction of wind power plants and had established a subsidiary in Taiwan to receive orders for the construction of large-scale offshore wind power plants. By sharing Denzai's customers, wind-related technical capabilities, and overseas business management expertise, we expected to achieve our long-awaited overseas expansion and grow our company even further.

Oversea orders have been received one after another: business growth was seen with the lively work of the employees

It was at the beginning of 2020 that you proceeded the M&A transaction in earnest, correct?

Mr. Lee:
Yes, in January people from Denzai came to Singapore for the acquisition audit. However, just then the COVID-19 struck. In Singapore, work had to be suspended due to cluster occurring at several construction sites. There was impact on our business performance, and we were stressed very much because it might adversely affect to negotiation on M&A.

The transaction was finally closed in December 2020. Although I didn’t feel it real at the day of the signing, as the days went by, I felt a sense of sadness, thinking, “Ah, now my children have left from me”. On the other hand, I also was released from the heavy responsibility of running the business since. The operation by Denzai is going well, and I can see that the business is developing with the employees working with energy and enthusiasm. I am happy and relieved now.

The signing ceremony, which took place in December 2020, proceeded in a friendly atmosphere from start to finish.
The signing ceremony, which took place in December 2020, proceeded in a friendly atmosphere from start to finish.

What changes of the company do you feel?

Mr. Lee:
The major development is in sales. At the end of December 2020, immediately after the M&A, our long-awaited collaboration on overseas infrastructure projects began in Bangladesh. In February 2021, we received a joint order with Denzai for the construction of a large-scale onshore wind farm in Vietnam, and in June, we were able to sell Denzai's services in Hong Kong through our customer. Thanks to our encounter with Denzai, a good partner, we were able to receive orders from overseas one after another, and made this a very satisfying M&A.

Lastly, do you have a massage for business owners considering transferring their company?

Mr. Lee:
First, after you decide to transfer, don't show a half-hearted attitude. If your determination wavers in the process, it may lead you to lose credibility. And above all, you need to examine for a good and trustworthy partner. In that sense, I can say that a success in M&A depends on the partner, but you never know when you will meet a good partner, so you must understand giving enough time to yourself to find a partner company.

Nihon M&A Center Representative’s Comment

Masahiro Nishii
Managing Director of Nihon M&A Center Singapore Pte. Ltd.

I still remember that Mr. Lee and people from Denzai hit it off immediately at the first meeting, as both companies are owner-operated, have a similar culture and a deep understanding of each other’s business. As a result of that the M&A was able to proceed maintaining good impression. I am pleased in the result that this project became one of bridges between Japan and Southeast Asia.

Heng wee Koon
Senior Advisor of Nihon M&A Center Singapore Pte. Ltd.

Both sides have achieved their respective objectives of the deal. In particular, the seller is able to retire with the knowledge that the staff will be well taken care off and the company progressing further through partnering with Denzai.

* Information at the time of execution of M&A

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