Global private equity firms have also attached keen interest to this emerging market. One Equity Partners LLC (OEP), a North America-based investment company under JP Morgan Chase & Co., is also preparing to enter China to make things happen. Beijing Review had the chance to interview Dr. Utz-Hellmuth Felcht, Managing Director of OEP, at the Bo’ao Forum for Asia in late April to hear his views on the development of Chinese companies, particularly those in the chemical industry.
Beijing Review: Can you give our readers an overview of what OEP does?
Dr. Utz-Hellmuth Felcht: OEP acts as an equity investor in management-led buyouts, and for growth capital financing with a particular emphasis on corporate partnerships and divestitures. It typically invests $50 million to $20 million per transaction. In recent years, OEP has invested approximately $3 billion to acquire over 20 companies in a variety of industries including defense, chemicals, healthcare, technology and manufacturing.
Normally, investors buy a company; they do something; then they go out. OEP doesn’t do that. OEP buys something where they know they can add on. OEP’s concept is to make a friendly takeover, and then add on, creating value by addition. Not by creating value through restructuring. The Bo’ao Forum for Asia is a very good opportunity to start, because you can meet a lot of business people here from China and Asia.
Why did you choose to work for OEP after you retired as the chief executive officer of Degussa AG (a multinational corporation aligned to specialty chemistry)?
In those years working with Degussa, I built up relationships in China. For the last four or five years, I have been to China at least 20 times to build our network in the chemical industry.
I know the paper industry, engineering industry, and generally the processing industry. I can use my networks in the chemical industry in China to add value to Chinese companies. Value can mean getting access to technologies, or it can mean getting access to worldwide marketing and sales. Many of the Chinese chemical companies export through dealers, they don’t have their own marketing or sales organizations outside China. But it is good that many of the Chinese chemical companies are thinking of it.
In OEP, with my 30 years of experience in the chemical industry, I want to tell people how to do business in China. OEP’s objective is to strengthen companies by purchasing them, so I’m here to help them. I know many people in the Chinese chemical industry. Many of those Chinese companies would like to own companies or form joint ventures with businesses outside China, like what Western companies do in China. We put Chinese companies and Western companies together, which provides the best fit. After several years, the Chinese company can acquire the Western company or do an initial public offering, whatever-then OEP will retreat.
As a senior leader at OEP, what is your view on the Chinese private equity business?
The Chinese private equity business is underdeveloped. But that will change. Private equity is not always a negative role as it is often described in Europe. Private equity also has much more possibility, because of the money available to build companies and strengthen them by investing in them or acquiring somebody else. That’s my understanding of how I work with a private equity firm.
Why have you made the Chinese market your market of choice?
China has been special to my entire career. Ten years ago, the Chinese chemical industry really started to emerge. I’ve been traveling to China since 1991, starting to build networks here. My understanding of doing business in Asia is that you need a long time and a network of personal relations. In the last two and a half years, I’ve been to China 18 times. The conditions in China have improved significantly.
What are your chief concerns when doing business in China?
One of the serious topics for me is still intellectual property. I think China has improved significantly since it joined the World Trade Organization (WTO). But I think China will still have to improve.
There is a simple reason, and the reason is changing. Originally, Western companies were accusing China of not following intellectual property rights correctly and of technology stealing, etc. But now China is seeing strong innovation by itself, and this is a reason for the Chinese Government to be even stricter on IPR. This is completely different. It’s not coming from the Western companies, it’s from their own innovative companies. If a Chinese company invents something and has a patent on it, it must be in the interest of the Chinese Government that these companies are protected against copyright violators, even against Chinese copyright violators.
| 
