- Elgar Korean Law series
Edited by Hwa-Jin Kim
9. Private equity in Korea: history, industry and policy Hwa-Jin Kim and Alice Z. Chen INTRODUCTION I. 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, regulations, 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 understanding 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 individuals 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 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of Capital Globalization on Korea after 1997: From the Perspective of Foreign Private Equity Funds 12 (Feb. 2008) (unpublished M.A. thesis, Korea University Graduate School of International Studies) (on...
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