M&A involving chemical trading companies in Malaysia can appear straightforward on the surface, many operate as lean entities and have straightforward trading models. Beneath the simplicity lies structural & operational complexities. This article explores the commons pitfalls faced by chemical trading companies in Malaysia when preparing for M&A.
Here are some key takeaways:
1. Lean Structures, Heavy Impact: Many chemical traders pride themselves on having a lean structure and operate with small teams. In our case, the resignation of one sales staff—out of a team of three—initially put the deal on hold. With a lean sales team, each team member’s contribution to the company carries significant weight.
2. Change of Control (CoC) Clauses in Key Contracts: One of their key suppliers – a global chemical manufacturer—had a CoC clause in their contract. It took over three months and countless follow-ups, proving that early action on such clauses is critical, especially when deadlines are tight.
3. Licensing Oversights: Though the company performed chemical blending and mixing, it lacked a manufacturing license which is often overlooked by companies where mixing and blending does not fall under their core business.
4. Property Compliance Gaps: An extended building wing had no formal approval which is a considerably a common matter for Malaysian companies. While a potential red flag, continuous engagement with the land office revealed that consent for the extension was not required, avoiding costly delays or remedial work.
Beyond these, we had to navigate challenging counterparties and seller’s concerns. We found that consistency and hands-on advisory support – being present, proactive, and responsive at every stage were key contributors to the success of the transaction.
In M&A, success often hinges not just on commercial viability but on managing the people, processes, and potential pitfalls. We find that being present, proactive, and responsive provided the sellers much needed practical advice and emotional support to carry them through the exercise.
If you’re considering a strategic transaction, it pays to have an advisor who understands both the technical and human elements involved.
For tailored M&A advisory services in Malaysia, get in touch with us.
