Interview: “Stronger than ever before” – PwC China Compass

06 Juli, 2020

Interview with Louis Kuang. Mr. Kuang has 15 years of investment experience at some of Wall Street’s most prominent institutions. He completed more than $10 billion in IPO, M&A and restructuring transactions. In 2016, he led the acquisition and subsequent turnaround of Bochumer Verein Verkehrstechnik Group (BVV), a 177-year-old company in Bochum, Germany.

How would you describe the main differences between your experience working for investment banks/funds and what you do now?

The major difference comes from mind-shifting. When I call myself a private equity investor sitting in the glass office in Midtown Manhattan, what drives my decisions are analytics based on spreadsheets, charts and reports. I had little touch with the business and the people associated with it. The truth about why the profits increase or how value is created exists only on paper. In the past few years in Germany, I have been engineer, field manager, and employee counselor, anything but an officiant. My work changed dramatically to dealing with many tangible aspects of analytics, factories, goods and people.

You observe the impact of business success on people, know their ever increasing spirits and share every bit of their joy. Suddenly the necessity to win under tremendous hardship becomes obscured, not just for shareholder value or personal reputation, but more for the prosperity of individuals and families behind them.

Where do you see Chinese investment in Europe going in the next several years?

After years of frenzy attempts, the zealot of Chinese overseas investment gradually calms down to a more rational optionality. Chinese investors had challenges in their oversea ventures. While still hungering for premium brands, advanced processes or local representation, Chinese money would move forward cautiously. Meanwhile, it would be for the best interests of European business to find a way to participate in Chinese markets, by either supplying highly sought after products or integrating the cost-effective supply chains there. When a well positioned investment from China brings true market access, synergies will increase. For example, after being acquired by Full Hill Enterprises, a Hong Kong based railway specialist, in 2017, BVV returned to China’s high speed rail market, the highest growth and most lucrative market for BVV among all segments, instantly contributing to the turnaround and profitability in 2018.

As an experienced overseas investor and manager, what words of wisdom do you have to share regarding post-merger management?

Empathy, detail and focus.
Having empathy does not mean you will forget who you are and where you come from. Instead, it constantly reminds you that an ordinary piece of mind in your view could encounter an entirely dissimilar mentality, be interpreted in a different way and result in a sharply deviating conclusion. Recognizing the culture difference, accepting your limited knowledge and embracing alternative thoughts, no matter how uncomfortable it may feel, you may find things making sense and appearing logical. Attending to details would in many cases set the right atmosphere for further cooperation. Business strategies are grand and inspiring, while they were achieved by simple steps. In many cases, I solved problems concerning millions or tens of millions of euros by considering very small details, being certain particulars in a contract or certain facts people take for granted every day.

Focus enables us to attack most critical, high impact problems. We live in a world of limited resources and today this world tends to reward those who understand ‘divide and conquer’. By allowing a disproportionate distribution of force and applying it to specific targets, we achieve precision.

With these characteristics in mind, we turned BVV from millions of loss to profitable just 1 year after acquisition. Here, we earn the support of employees and local management by mutual respect, follow closely the very granular level of operating data and immerse into issue resolutions most relevant to strategic goals.

Given the impact of COVID-19, do you think there will be stricter national technical protection policies for foreign investors?

Even without the impact of COVID-19, European markets have always presented challenges of local characteristics to foreign investors. My view on this issue consists of multiple aspects. First, there is NO winner in protectionism. Second, COVID-19 is a catalyst to accelerate the exposure and diminishing of zombie companies – those that should have become extinct due to their low efficiency and lack of competitiveness. Third, a technology would only be of value if it proves to bring better life to people. Therefore, a dying business, if it could be saved by either domestic or foreign buyers, should be given a second chance. In reality, we should be grateful that many European governments and their decision makers, though under ideological pressure, take very pragmatic approaches to allow capable foreign investments to save fragile companies and associated jobs, thus yielding a long term viability for Europe.

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