An interesting story of an International Company in the Chinese Market

September 6, 2017
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An interview with Assaf Skolnik – RIT Tech CEO, who led former RIT activities in China and its acquisition by a Chinese corporation.

RIT Technologies specializes in advanced communication infrastructure to organizational computer rooms, and offers hardware and software solutions. RIT was established in 1989 by the Zispel brothers as part of the Rad-Bynet Group. In 1997 it turned into a public company when it was first publicly issued at NASDAQ and in 2008 the control core was sold to the Russian Stins Coman Group. Recently’ the company’s activities and assets were purchased by the world largest optic fiber company YOFC. At its prime at NASDAQ, RIT was traded at a market cap of over $50 million.

 

When and how did you enter to China?

“Our Chinese activity started at 2005. At first, we managed our business through Representative Office but it limited us in many ways, since we used international distributors and OEM and did not sell our products directly to local distributors or to the end clients.  We faced two challenges by working in China through Rep. Office:

  1. Our work was restricted to distributors with an import licensed, while the majority of the market is composed by local distributors without that license, which we could not work with.
  2. Without a local company, we could not manufacture in China and directly sell it locally. We had to manufacture in China, ship the goods out of China and then sell it to China”

2015 – RIT Begin to work with PTL Group in China

“In order to cope with both challenges, I led, as the company’s VP of sales, toward signing services agreements with PTL Group. The first agreement was a logistic one: local distributors purchase from PTL Group, and PTL Group, as a Chinese company buys from us in our home-country. The second agreement was offices and HR. We realized that a Representative office in China (RO) added no value to us, so we closed it and employed our staff through PTL Group. We used their services and were able to open offices utilizing their platform, both in Shanghai and in Beijing.”

Later we wanted to expand our activities with PTL Group and make them our local manufacturing representative in China.  Unfortunately, we did not sign an agreement due to financial cash flow difficulties and $10 million debt of our previous controlling shareholder (Stins Coman Group). In order to save the company’s activities we had to go to a liquidation process.”

2016 – RIT purchased by world largest optic fiber company – Chinese YOFC

One of the companies who expressed an interest in buying RIT and its assets was YOFC – the world largest fiber optic company. Eventually, YOFC did purchase RIT and its operations.

We established a new company named RIT Tech. during 2016 we bought from RIT’s liquidator its assets, brand and IP. RIT Tech also bought RIT’s Chinese business operations. By the end of 2016, we finished the acquisition process”. According to press publications, this was YOFC’s first investment in Israel, and was part of a broad strategy of entering the Israeli market. Skolnik states that “the company under my leadership will remain Israeli but would expand its global activities”.

Chinese market entry and expansion

Assaf skolnik – who previously managed the RIT’s Chinese operations and is currently the RIT Tech’s CEO emphasizes that “Our interface with PTL Group helped us to enter the Chinese market and expand our activities, as we were able to interact with new target audiences and business partners that were previously out of reach. In addition, we were able to employ our personnel in China in a more convenient fashion. PTL Group team provided us with above-and-beyond professional service.”

“The Chinese market is a dominant market for us at RIT Tech and we plan to continue our operations there and expand it. As a result of us being purchased by Chinese YOFC we will receive its economic support locally as well its technological, operational, manufactural and sales support”.

 

Crisis management – A few points from PTL Groups’ perspective

While working with RIT we, at PTL Group, faced tough challenges.

First – closing the Rep. Office was extremely complicated. Since it is easy and fast, many companies are tempted to open a Rep. Office in China. But people are not aware of the costs that are involved in having a Rep. Office, its tax requirements and especially the enormous complexity of closing a Rep. Office. The process of closing a Rep. Office like RITs’ took over 18 months.

Second – working with a company during its liquidation process highly tested our abilities, but also emphasized the true advantages of PTL Group – that shine through crisis. When RIT entered liquidation, PTL Group was at the front – facing RIT’s Chinese staff that was employed by PTL Group. PTL Group could not wait to Israeli court decisions. It had to take care of those employees in China and get them the legal Chinese salaries and compensations.

Additionally, PTL Group had to deal with a distributor that was waiting for the arrival of RIT goods. Here, as well, PTL Group was in the middle – as the entity who signed the contract with him. PTL Group Chinese management team worked relentlessly to solve the crisis and have all parties satisfied without using courts.

At the end of the project we, at PTL Group, felt content. We have learned, again, that the qualities of our services are best measured at a time of crisis, not when everything is calm, but rather when our clients need all of our experience and all the managerial knowledge that was accumulated with our professional managers. Those are the times that create case studies worth sharing.

In spite of the difficulties, it is important to note that we had full and positive cooperation from both sides; from the minute we were informed that liquidation is necessary until the end of that process, suffering minimum damage. We are grateful to Asaff for working with us and wish him a great success at the Chinese market as well as at the global market with the new RIT Tech.

PTL Group assists international companies to run their operations at the Chinese market. We will be happy to assist you as well and offer our professional services in China. Contact us