We advised a listed group in Singapore on its acquisition of a majority stake in pawnbroking companies in Malaysia.

The following are three takeaways that I find interesting from the transaction:

1. Increased sophistication

The traditional perception of pawnbroking business as small-scale operations has significantly shifted towards increased sophistication. An example is the introduction of drive-through pawnshops in Malaysia since 2017, indicative of convenient and innovative service offerings.

Furthermore, it is noteworthy that established jewellery companies are venturing into the pawnbroking industry by acquiring stakes in or entering into joint ventures with pawnbroking companies to complement their existing jewellery business.

2. Numerous shareholders

The pawnbroking business is relatively capital-intensive. Unlike typical private companies, which usually have a single-digit number of shareholders, pawnbroking companies may have a larger pool of shareholders.

It is important to identify the key shareholders representing the sellers during negotiations, as understanding their influence on the decision-making process impacts the negotiation dynamics.

3. Atomic energy licence

 In addition to the pawnbroker licence, a licence may be required under the Atomic Energy Licensing Act 1984 of Malaysia to carry out pawnbroking business. Despite the name implying nuclear-related activities, this legislation provides that a licence is required to purchase, own, possess, use, handle, or store irradiating apparatus. Pawnshops commonly use irradiating apparatus in the form of X-ray gold testing machine.

One aspect of M&A which I find interesting is that it provides me with insights into the industries of the target companies, extending beyond mere legal knowledge.

#malaysiancorporatelawyer

#mergersandacquisitions

This post first appeared on LinkedIn on 23 November 2023.