An ac­qui­si­tion done right

Pre-in­su­lated pipe man­u­fac­turer looks to grow re­gion­ally

The Star Malaysia - StarBiz - - Smebiz - By LIM WING HOOI winghooi@thes­

NOT all ac­qui­si­tions in the cor­po­rate world would yield ben­e­fi­cial re­sults as pro­jected in the ear­lier stage. Many have reg­is­tered losses and even­tu­ally parted ways, be­ing worse off than be­fore.

But in the case of Ricwil Sdn Bhd, 41-year-old Nomis Sim Siang Leng made sure that due dili­gence was done prop­erly and that plans were ad­hered to so that they are able to max­imise their ac­qui­si­tion ex­er­cise.

In 2007, the own­ers of Ricwil de­cided to call it a day and wanted to sell the com­pany.

Ricwil is a pre-in­su­lated pipes man­u­fac­turer and trad­ing com­pany.

At that time, Sim’s fa­ther, Sim Keng Cher, 70, was op­er­at­ing a trad­ing com­pany that dealt mainly with pip­ing ma­te­ri­als. They sup­plied a va­ri­ety of pipes to Ricwil for their pre-in­su­lated pipes pro­duc­tion ac­tiv­i­ties.

When they heard of the news that Ricwil was up for sale, Sim was ex­cited.

For years, Sim had wanted to pro­duce their own prod­ucts and the chance to make that wish come true was right in front of him.

He put on his think­ing cap and ex­plored the pos­si­bil­i­ties that could come out of this po­ten­tial ac­qui­si­tion. He thought things through and noted that the best way to go about it was to have Ricwil op­er­ate as an in­de­pen­dent com­pany that would com­ple­ment his fa­ther’s busi­ness rather than as a sub­sidiary of the com­pany his fa­ther founded.

But his fa­ther was cau­tious. As one who had worked from the ground up, his fa­ther was aware of all the things that could go wrong and was care­ful with such a big in­vest­ment.

Sim’s fa­ther earned a rep­u­ta­tion of be­ing an hon­est and hard­work­ing per­son. He had worked his way up from do­ing film de­liv­ery to be­com­ing a cinema man­ager. His fa­ther even­tu­ally de­cided to start a busi­ness, choos­ing to op­er­ate a hard­ware shop in 1976 in Bangsar, Kuala Lumpur, serv­ing re­tail cus­tomers who needed ba­sic hard­ware tools such as nails and screw­drivers.

His fa­ther’s com­pany even­tu­ally ex­panded into whole­sale dis­tri­bu­tion of build­ing ma­te­ri­als in 1978, fo­cus­ing on pipes, fit­tings and valves. Their clients were from the me­chan­i­cal and elec­tri­cal seg­ment in­clud­ing those do­ing plumb­ing, elec­tri­cal, fire fight­ing and air-con­di­tion­ing.

Sim joined his fa­ther’s com­pany in 2002 as an ac­counts man­ager and had the op­por­tu­nity to scru­ti­nise their clients, which in­cluded Ricwil.

So in 2007, when the own­ers of Ricwil de­cided to call it a day with no suc­ces­sion plans in place, Sim saw the po­ten­tial in ac­quir­ing the man­u­fac­turer.

Ricwil pi­o­neered the man­u­fac­tur­ing of pre-in­su­lated pipes in Malaysia in 1984 and had been one of Sim’s ma­jor clients since 1997.

“Ricwil was one of the ac­counts that we were han­dling at that time. They have deep knowl­edge about and ex­per­tise in pre-in­su­lated pipes and also have a strong client base,” Sim says.

Sim adds that the tim­ing couldn’t have been bet­ter as he was then think­ing about ways to ex­pand his fa­ther’s ex­ist­ing client base.

He notes that the heat­ing, ven­ti­la­tion and air con­di­tion­ing (HVAC) seg­ment is a close-knit in­dus­try where con­trac­tors or­der their goods di­rectly from the man­u­fac­tur­ers rather than go through a whole­saler like his fa­ther’s. And Ricwil had this direct re­la­tion­ship with HVAC con­trac­tors.

The HVAC seg­ment then had a mar­ket size of about RM50mil per an­num while Ricwil was do­ing an­nual sales of RM12mil.

Sim saw a huge op­por­tu­nity for Ricwil to grow fur­ther and saw syn­ergy with his fa­ther’s com­pany, which was then op­er­at­ing at a 5.2acre ware­house in Shah Alam and was turn­ing in rev­enue of about RM130mil.

Get­ting it right

It was an ex­cit­ing mo­ment, rec­ol­lects Sim. He pre­pared his cal­cu­la­tions and pro­jec­tions prop­erly be­fore con­vinc­ing his hes­i­tant fa­ther to in­vest in ac­quir­ing Ricwil.

His home­work paid off as he man­aged to per­suade his fa­ther with a solid busi­ness plan.

Sim’s fa­ther then roped in chief op­er­at­ing of­fi­cer Chan Sang Whye, 63, to join the com­pany’s due dili­gence team.

“We eval­u­ated the whole growth strat­egy of Ricwil and iden­ti­fied po­ten­tial ar­eas that could syn­er­gise with the ex­ist­ing com­pany. Apart from that, we also looked at the po­ten­tial of the mar­ket and con­cluded that Ricwil has a strong mar­ket pres­ence in the HVAC seg­ment,” Chan says.

Chan, who has over 20 years of ex­pe­ri­ence in the steel in­dus­try in­clud­ing be­ing a chief op­er­at­ing of­fi­cer at a pub­lic listed com­pany, adds that their build­ing ma­te­ri­als

Ex­pand­ing the com­pany

Three months into the ac­qui­si­tion, Sim re­alised that it was im­por­tant to as­sure the staff at Ricwil of their fu­ture in the com­pany to avoid any po­ten­tial con­flict or mis­com­mu­ni­ca­tion, which could af­fect morale and pro­duc­tiv­ity.

Once he took full con­trol of the com­pany, the first mes­sage that was re­layed to the ex­ist­ing staff was that all the ben­e­fits that they were en­joy­ing then will be main-

Steel be­gin­nings: The com­pany utilises plenty of plain steel pipes for raw ma­te­ri­als.

De­tailed: An em­ployee weld­ing the parts to make a qual­ity pre-in­su­lated pipe.

Dif­fer­ent sizes: The com­pany man­u­fac­tures a va­ri­ety of pipes.

Endgame: Sim has plans to grow Ricwil into a re­gional player.

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