ASNOVA’s First M&A Involves an Overseas Company — A Growth Strategy with the Circular Economy in Sight

Takeba: ASNOVA was founded in December 2013 and has spent the past ten years building its business around scaffolding rentals. To begin with, what inspired you to launch this particular line of business?

Ueda: The type of scaffolding we handle is known as “wedge-type scaffolding.” It’s commonly used for low-rise residential construction and renovation projects, particularly for aging infrastructure. In recent years, with the increasing frequency of natural disasters, scaffolding has also become essential in disaster prevention and recovery work. While it’s a rather niche market, we continue to gain 300 to 400 new clients each year. That tells me there’s still strong and growing demand.

Our business model is quite simple. We purchase scaffolding from manufacturers and rent it out to scaffolding contractors. When a renovation or construction project arises, the remodeling company typically contacts a scaffolding contractor. However, most contractors only own a portion of the scaffolding they need, so they come to us to rent the rest. To meet this demand, we’ve been expanding our network of equipment centers, guided by a regional strategy, in order to increase the amount of scaffolding we can offer.

Takeba: And now, you've just completed your first M&A — and with a company in Singapore, no less. Could you walk us through how this opportunity came about?

Ueda: In my mind, I always had the sense that the scaffolding rental business would reach a natural turning point after about ten years. As I mentioned earlier, we’re fortunate that demand has continued to grow. But with that comes the need to keep increasing our inventory of materials and to open more equipment centers to support it. I had a personal policy: after making major investments in a single business for ten years, I wouldn't continue putting all of our resources into just that one area for the next ten.

With that in mind, I felt that our scaffolding rental business had grown in a very healthy way over the past decade—and that now is the ideal time to take the next step and move into a new business area.

Additionally, we don’t view scaffolding rental simply as a business — we also approach it from the perspective of realizing a circular society. In other words, we must break free from the cycle of mass production and mass consumption and create a business model that contributes to a sustainable, circular economy. One key part of that strategy was pursuing M&A.

When we thought about what kind of company would be best, we decided to focus on the rental business, which is ASNOVA's strength. As many domestic companies were already involved as parent companies in the domestic companies we were selling, we decided to look overseas rather than domestically, and we focused on Singapore.

ASEAN has a land area about 12 times larger than Japan, a population roughly five times greater, and a GDP reaching nearly 90% of Japan’s — poised to soon surpass it. I found this to be a very intriguing market. In particular, Singapore offers excellent access from Japan and, looking ahead, I believe it will become a key business hub for the entire ASEAN region.

Takeba: At that time, we introduced you to Qool Enviro Pte.Ltd. , didn’t we?

Ueda: Yes. When I first heard about their toilet rental business, I have to admit, I wasn’t immediately convinced. But after reviewing their financial statements, I thought, “This is impressive.” Like scaffolding, toilets have a depreciation period of five years, yet some units have been in use for over 16 years. That means fully depreciated toilets are still generating steady monthly cash flow. It’s a business model similar to scaffolding rentals, and I was attracted by how our experience could be applied in this area.scaffolding, and the depreciation period is 5 years, and the old one has been used for more than 16 years. It means that the amortized toilet generates a stable cash every month. scaffolding I was attracted to the fact that it had the same structure as rental and could make use of our experience.

When people hear “overseas M&A,” they usually think of major hurdles like language barriers, cultural differences, and the challenges of post-merger integration (PMI). However, in your case, it seemed to have gone remarkably smoothly.

Ueda: When it comes to the “language barrier,” I’m definitely the biggest challenge myself (laughs). My English is broken, and sometimes I wonder how I managed to communicate as well as I did. There are cultural differences as well, but more than that, I focused on seeing how much they cared about their employees and their business. For me, it was important to ensure that our values and direction were aligned.

Because cross-border M&A is generally seen as a high hurdle, I actually see it as an opportunity. The unknown can hold untapped potential, and that’s what excites me.

Regarding PMI (post-merger integration), we hold monthly meetings involving our internal team, Qool Enviro Pte. Ltd.’s board members, and external experts who provide advice. We use automatic translation services during these discussions, which helps the communication proceed smoothly without much stress.

Of course, this was our first M&A, and the fact that it was overseas brought some concerns. However, when we discussed the need for someone to work locally, one of our employees volunteered, saying, “I want to go.” That person is now working hard alongside the local team.

After the M&A, I also held one-on-one meetings with each employee of Qool Enviro Pte. Ltd. Through interpreters, I wanted to personally convey the message, “Let’s build the future together.” Thanks to that, many employees told me they felt reassured, and I believe it played a very important role in establishing a foundation of trust.

Takeba: That’s wonderful to hear. Could you please share a message for companies considering overseas M&A in the future?

Ueda: I believe many people see cross-border M&A as a high hurdle. But in reality, I don’t think it’s that difficult. By clearly defining your company’s position and direction, and riding the wave of growing economies, markets, and populations, new opportunities will open up.

For ASNOVA, the next three years are crucial. We want to continue growing while gaining experience in ASEAN. What’s most important are trust and determination. Once you analyze the numbers and find a partner you can resonate with, the only thing left is to make a decision. After doing it once, your perspective will change. Step by step, we aim to grow as ASNOVA pursues its vision of becoming an excellent company in the circular economy.

Related videos

You can watch the related interview on the official Nihon M&A Center YouTube channel.