In March 2017, Yang Kee Logistics announced the completion of the company's biggest deal to date: acquiring Axima, an Australian freight management business, for $34 million.
Axima, described as a key player in Australia's third-party logistics market, also has a strong presence in the U.S. and China. Following the deal's close, Yang Kee Logistics Group CEO Mr Ken Koh enthused that Axima is a "good fit for us." The acquisition would not only boost the company's revenue by $150 million, he said, but would also allow Yang Kee to significantly expand its presence overseas, ultimately paving the way for the firm to become a truly global player in the industry.
Mergers and acquisitions are widely recognised as a useful and effective way for companies to gain inroads into competitive markets and established business networks. But in an industry like logistics, said Mr Koh, M&A can be particularly fruitful.
"Contract logistics, and particularly freight forwarding, is a network business," he explained. "But it's also a very localised business." In other words, if companies want to thrive globally, establishing a presence in markets overseas is not enough. They would also need local connections and local knowledge. "As an outsider, you'll never be as familiar with the market as the locals are," said Mr Koh.
And that's where M&A can come in very handy.
In Yang Kee's case, the firm had long desired to gain a foothold in the three very important markets of Oceania, the US and China. Doing so would mean a tremendous expansion of its global network, Mr Koh explained, and thus more control of its supply chain and better connectivity for its clients.
But the company also knew that attempting to enter any of three markets alone -- all of them very competitive and full of bigwig rivals -- would be extremely challenging. Acquiring a business already established in these countries was the best possible path, Mr Koh believed.
"When I buy these companies, I don't just gain the network but their customers too," he said.
In the case of Axima, the company had a strong presence in their domestic market with four offices in Australia; and they also had several offices in China and a couple in the U.S. too. By acquiring the firm, Yang Kee gains Axima's customers and can "bring them to Asia," said Mr Koh, while also expanding what they can offer to their Asian customers.
The acquisition of Axima took about three years, said Mr Koh. It was costly and not always easy, but overall, the undertaking went surprisingly "smoothly," he said.
Mr Koh credits a clear vision and strategy, as well as a rigorous shortlisting process, for the relatively trouble-free experience; and also the input and support of the Yang Kee's longtime partner, IE Singapore.
IE Singapore, which has been working with Yang Kee for over a decade, assisted the company in its feasibility studies and offered other professional support in the lead-up to the deal. The agency introduced Yang Kee to legal experts and consultants, and helped the firm in narrowing down its choice of potential companies.
With so many moving parts and options on the table, IE Singapore's assistance "gave us comfort," said Mr Koh of the support. The government agency's neutrality, solid reputation, government ties and deep knowledge of overseas markets meant Yang Kee "wouldn't be taken for a ride," he added.
What also helped to smooth the way was Mr Koh's clear-headed vision of the kind of company Yang Kee was looking for. "We were looking for chemistry — likeminded people who we could get along with. We didn't want to spend energy exerting our authority or getting into disputes, but instead focusing on growing the business."
An Australian company also felt like the right choice. "In Australia, corruption is minimum, there's a lot of transparency and a strong rule of law," said Mr Koh. "People respect contracts. There's less hanky panky."
Axima was a perfect fit in all these regards. "It's been wonderful so far," Mr Koh said of the union.
But though the choice of company was relatively straightforward, forging the actual deal wasn't a walk in the park. Yang Kee spent half a million dollars on legal fees and due diligence, said Mr Koh, and the process was both complex and long-drawn.
M&A grants and other forms of support from IE eased these stresses, said Mr Koh. "As an SME, IE's grant helped us in no small way. It defrayed some costs and made it all less painful."
Originally established as a trucking company in 1990 by Mr Koh's father, Yang Kee has morphed over the years into a multi-service logistics business, encompassing contract logistics, freight forwarding, and transport and yard services.
The firm started expanding overseas in the early 2000s as the logistics industry became increasingly competitive in Singapore. Mr Koh, who joined the family business in 2001, said IE played a critical role in this global growth. "IE encouraged Yang Kee to move overseas," he said. "Logistics is a global business, and you can never be truly big or strong if you stay in one market. We gained that mindset from IE."
Over the years, Yang Kee has benefited from IE's assistance in numerous ways. Mr Koh remembers attending many IE-organised business missions in the US, Middle East, Australia, Europe and elsewhere. "Through these missions, we increased our knowledge of these markets," said Mr Koh. "We also learned from multinational companies and other companies that we wouldn't have had access to without IE. It opened our eyes to the competition and to the world - how much more we have to learn."
Since the 2000s, Yang Kee has grown steadily and organically in Southeast Asia, first through partnerships and then through wholly-owned subsidiaries and their own incorporated companies. Today, the firm has a strong regional presence with offices in Malaysia, Thailand, Indonesia and Cambodia, among other markets.
But Mr Koh said the firm's aspirations have, in recent years, grown beyond this natural hinterland. The desire, he said, is to expand Yang Kee's network well beyond ASEAN.
"The next M&A target is Germany and we're looking forward to work with IE Singapore on this again in the near future," said Mr Koh. "Germany is an export powerhouse and its logistics companies are renowned all over the world. An acquisition there would give us a much better network."