An acquisition done right
Pre-insulated pipe manufacturer looks to grow regionally
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.