Private equity funds have emerged as the home for new financial elites, leading the domestic mergers and acquisitions market.
Boosted by a surge of capital inflow into the private equity industry, more capable financiers are joining the industry in which a merit-based wage system linked to investment outcomes is prevalent.
Among a new breed of new business power elites, those standing out have a strong connection with chaebol, South Korean family-controlled conglomerates.
As children of influential people in the financial world have extensive personal connections, it is relatively advantageous for them to lobby behind the scenes and gather investments from gigantic investors like chaebol.
Unlike financial institutions that deal with private investors such as asset management, private equity firms target institutions and large investors to raise funds for mergers and acquisitions deals, increase the value of corporations, and eventually gain commissions by reselling them at a higher price.
Private equity firm heads with a chaebol background include the two sons of Samsung chairman Lee Kun-hee’s former right-hand man Lee Hak-soo.
The advisor’s elder son Lee Sang-hoon is the managing director of Morgan Stanley Private Equity Asia. His second son Lee Sang-ho is the CEO of Glenwood Private Equity Fund.
The two have followed their father’s footsteps. They graduated from Korea University and gained experience at corporations to become financial specialists at global investment banks, later joining the private equity industry.
Eldest son Sang-hoon first worked at Samsung C&T in 1998 and then gained a Master of Business Administration from Massachusetts Institute of Technology. After returning to Korea in 2001, he worked at Samsung Life Insurance and Merrill Lynch, eventually joining Morgan Stanley Private Equity.
From 2011 Sang-hoon obtained considerable return-on-investment results after investing in dining brand Nolboo, possessing NolbooNGB, Innocean and Hyundai Rotem, among others.
The second son, CEO of Glenwood Sang-ho, successfully won the bid to partner with NH Investment & Securities and took over Tongyang Magic last year. He previously worked at investment bank Goldman Sachs Korea while gaining experience in mergers and acquisitions until 2013. He joined Glenwood in 2014.
Meanwhile, Hak-soo, his wife, and two sons are also running a family business called LNB Investment, located in L&B Tower. The Lee family owns the building worth 200 billion won ($166 million) in the upscale district of Gangnam, southern Seoul.
During his time at Samsung, Lee was charged with unlawful Samsung SDS stock allocation while helping Samsung Electronics vice chairman Lee Jae-yong with his succession. He was sentenced to five years in prison and put on probation for 2 1/2 years. However, he was granted a presidential pardon in 2010.
Along with management skills, powerful personal connections play a very important role in the private equity industry, making it a lucrative career for children of influential people.
They have an upper hand in attracting investments as they have strong foreign language skills, acquired though studying abroad, as well as a very good network.
Rising private equity stars with chaebol connection also exist abroad. One such example is the third generation of LS Group founding family Koo Bon-woong.
Koo, one of the founding members of Formation 8, is the grandson of LS Cable & System honorary chairman Koo Tae-hoe and eldest son of LS-Nikko Copper chairman Koo Ja-hong.
Koo cofounded investment firm Formation 8 in Silicon Valley with associates he met while studying at Stanford and invested in around 50 start-ups in 2012. After expanding the business into a private equity firm, he successfully gained multiple investment profits.
Formation 8 invested $12.5 million in virtual-reality technology company Oculus VR, which was later acquired by Facebook in March 2014, which increased investment profits by tenfold, amounting to a jaw-dropping $130 million.
Koo also played a major role in investing $15 million in domestic mobile service company Yellow Mobile in November 2014.
He was furthermore notably praised for his efforts when he scouted Joel Sun, the great-grandson of Sun Yat-sen, the founding father of the Republic of China, in Singapore in December 2014.
After graduating from Harvard and working at Facebook, Sun was famous for investing early in China’s smartphone manufacturer Xiaomi as well as Airbnb, Facebook and Uber.
The sons-in-law of Korean business tycoons are also having their share of success in the private equity industry.
Kim Byung-ju, chairman of MBK Partners, one of the leading private equity firms in Korea, is POSCO’s honorary chairman Park Tae-joon’s fourth son-in-law.
Born in 1963, Kim went to the U.S in his teens, graduated from Haverford College, and then went on to gain his Master of Business Administration from Harvard. He later worked at Citi Group, Goldman Sachs and Carlyle Group to gain experience.
While working at Carlyle Group during the Asian financial crisis, he was instrumental in acquiring KorAm Bank, generating profits of 700 billion won in three years. The bank was later resold to Citi Group for an enormous profit.
Kim was promoted to vice chairman in the Carlyle Group, but he resigned in 2005 to establish an independent company named after himself -- Michael Byungju Kim. MBK’s current net worth amounts to $8.2 billion, which makes it the largest private equity firm in Asia-Pacific.
Honorary chairman Park’s eldest son-in-law is former Pine Street Group chairman Yun Young-gak, an influential figure in domestic mergers and acquisitions.
Yun has lead Korea’s representative accounting consultancy Samjong KPMG for 20 years. After founding Samjong Consulting Group in 1991, he joined the company with global accounting and consulting group KPMG in 2001 to create Samjong KPMG.
After leaving Samjong KPMG in 2012, he cofounded the Pine Street Group with the former vice chairman of Lehman Brothers Cho Kun-ho, and retired last year.
Clearly, those who join the private equity industry with fewer connections than chaebol are in for fierce competition and a bumpy ride.
By The Korea Herald Superrich Team
(
seoyounglee@heraldcorp.com)
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Hong Seung-wan
Cheon Ye-seon
Bae Ji-sook
Yoon Hyun-jong
Min Sang-seek
Lee Seo-young
