In the News: 2002

FinanceAsia Achievement Awards 2002 - Deals of the year

Best Private Equity Exit
17 December 2002

Sale of Good Morning Securities to Shinhan Financial Group
Lombard APIC, GIC, H&Q Asia Pacific

The key to good private equity investing is to know when to get in and when to get out. The sale by the controlling shareholders of their stake in Good Morning Securities to Shinhan Financial Group is an almost text book case of getting in at the bottom and getting out at the top. The consortium has made almost a perfect exit from its brave 1998 investment into Good Morning, in the process becoming the first successful international private equity divestment in Korea.

Back in September 1998, the consortium bought into the ailing Good Morning Securities, which was the renamed securities business of the Ssangyong chaebol. In 1997/1998, Good Morning had lost $191 million and needed new capital, fresh ideas and good leadership. It found all three in its new shareholders. The consortium paid some $75 million for its controlling stake with H&Q Asia Pacific contributing some $30 million.

Three and a half years later, the team have sold out making a return on their stake of over 600%. This was a hugely successful deal, which came about as a result of the shareholders' restructuring of the brokerage. This included defining the strategy of the company, bringing in new management, focusing on products and services and improving corporate governance.

It must be said that the investment benefited hugely from Korea's swift turnaround from the 1997/1998 financial crisis and the intervening tech market stock boom. However, with a six fold return, this deal allowed the shareholders to beat the return they could have made on the local index by three times, which shows that as much judgement as luck went into the success of this deal.

In the same way that the investment was one of the first private equity buy outs in post crisis Korea, so the exit should be the first of a new wave of sales in Korea as the process of consolidation speeds up. It sets a very high benchmark for other exits to try to match.