Kim, Hwa-Jin; Chen, Alice Z. --- "Private Equity in Korea: History, Industry and Policy" [2012] ELECD 875; in Kim, Hwa-Jin (ed), "Korean Business Law" (Edward Elgar Publishing, 2012)

Book Title: Korean Business Law

Editor(s): Kim, Hwa-Jin

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781781003398

Section: Chapter 9

Section Title: Private Equity in Korea: History, Industry and Policy

Author(s): Kim, Hwa-Jin; Chen, Alice Z.

Number of pages: 19

Extract:

9. Private equity in Korea: history,
industry and policy
Hwa-Jin Kim and Alice Z. Chen

I. INTRODUCTION

When the Korean economy first opened its doors to the world in 1996
as a condition of its acceptance into the Organization for Economic
Cooperation and Development ("OECD"),1 the country's policies, regu-
lations, and social and political mindsets were not ready for financial
globalization. This plunged Korea into the Asian financial crisis, which
resulted in a forced conciliation to the International Monetary Fund for
loans and a hasty embrace of foreign capital without a proper understand-
ing of the underlying risks or policies required.
Korea initially welcomed investments from foreign private equity funds
("PEFs"). Such funds typically raise capital from institutions and indi-
viduals such as pension funds and university endowments. Buyout PEFs
invest this capital in companies that are on the brink of bankruptcy, laden
with distressed assets, or undervalued by the market. The buyout funds
then restructure these companies using different business strategies to
make improvements, and usually make an exit within two to four years by
selling the improved company to a strategic buyer or taking their shares to
the public market through an initial public offering.2
Initially viewed as white knights in the years immediately following the
Asian financial crisis, public sentiment toward foreign PEFs gradually


1 Hye-Sun Hwang, The Impact and Implication of Capital Globalization

on Korea after 1997: From the Perspective of Foreign Private Equity Funds 12
(Feb. 2008) (unpublished M.A. ...