Why Private Equity Fails in Korea: KEB-Lone Star

Private Equity Firms Strongly Disagree With This Attitude
There are some very large reasons why the “next Facebook” probably doesn’t come from South Korea. One reason is NOT the lack of educated, creative people. However, the ones that do exist are enormous. First, chaebol dominate everything in Korea. The evidence is abundant. Lee Kun-hee, chairman of Samsung, has publicly disagreed with a proposed policy which would provide funding for small and medium-sized enterprises (SMEs). Second, private equity firms do not have confidence that they can monetize their investment at some point in the future. The case that they rightfully examine, and rightfully point to as evidence is the KEB – Lone Star debacle. The Seoul Gyopo Guide has detailed the underlying fact: you do not get to change your mind/policy after the fact, after a legal agreement has been reached, just because you do not like the outcome. That is particularly true when the policy changes as a result of popular opinion. That is precisely the way that private equity firms are looking at the the KEB – Lone Star situation. Lone Star took the risk, the outcome was uncertain at the time, and they rightfully deserve the reward for taking the risk at that time. Every other complaint, statement, etc is subordinate to this unchallenged concept. Every complaint, statement, etc looks anti-foreigner, and runs against fundamental economic principles. Period. Koreans also know that policy changes occur frequently on political whim. This is the behavior of an under-developed economy, not a sophisticated one.

The Recent Korea Times Article is a BAD JOKE
Incredibly, this article was published which stated, “Either way, Lone Star to be a winner.” That is not the way that Lone Star or other private equity firms, will view the situation. The fact is that every private equity firm has, is, and will question whether or not the Korean legal system will defend an investor’s rights, regardless of race. To suggest “well, you win anyway, no matter what the outcome,” is totally wrong. The investors could have used that money for other purposes, like trying to find the next Facebook in Korea. Importantly, investors would have certainty, and faith in the Korean system. Make no mistake: every single day that passes without a legitimate reason for a delay is seen as a negative. Take a simple example. You sell a Gangnam apartment, and agree upon a price. You wait 5 YEARS for the payment? During that time, what would you have done with the money, which was yours in the first place? Nothing? What if you could have used that money, and invested in something else that would have become more valuable during that time? Would you be happy? Nope. Yes, it really is as simple as that.

Not a Single Counterargument
The Seoul Gyopo Guide has challenged, prodded, BEGGED to hear a counterargument against any of the points that have ever been made here or any other forum. There has not been a SINGLE letter or comment or email to the Seoul Gyopo Guide over this matter. NOT ONE. That is really all you need to know.