Executive Rooms Without Windows... The Secret to Meritz Securities' Success

Interview with Lee Sehun, Executive Vice President of IB Business Division

[Asia Economy Reporter So-yeon Park] The 22nd floor of Meritz Securities headquarters in the IFC Building, Yeouido, Seoul. Entering the office of Vice President Se-hoon Lee, Head of IB Business, it is a windowless room. When asked, "Why does an executive's office have no windows?" Vice President Lee replied, "It's the philosophy of the Vice Chairman." He said, "From the time this building was occupied, executives were given offices, so windows were to be reserved for employees," and laughed, "Actually, executives shouldn't stay in their offices. They need to get out and be active."

Meritz Securities is recognized in the industry as a growth company. It has continued its growth by setting record-breaking performance for five consecutive years. In 2021, the consolidated net profit was 782.9 billion KRW, a 38.5% increase compared to the previous year. Operating profit and pre-tax profit were 948.9 billion KRW and 1.0472 trillion KRW, respectively, increasing by 14.6% and 36.5% during the same period. More than 50% of the revenue came from the IB division. Recently, it surpassed 5 trillion KRW in equity capital, meeting the requirements for a mega IB.

Se-hoon Lee, Vice President and Head of IB, said, "When I first joined Meritz 10 years ago, the equity capital was 500 billion KRW, and now it has increased tenfold." He cited Meritz Securities' fast decision-making structure as the secret to growth. He mentioned, "The top executive, the Vice Chairman, takes an interest even in practical matters and communicates freely with employees," adding, "Fast decision-making is the biggest advantage and the driving force behind growth." They communicate frequently via messenger and meet anytime and anywhere when decisions need to be made. They study the business structure together, improve it, and assess risks. Vice President Lee explained, "If we judge that it is a business we can manage, we proceed quickly, and if we think it won't work, we withdraw promptly." He emphasized, "A tenfold growth over ten years is a unique history even in the securities industry, and it was achieved through collective effort rather than individual performance."

Last year, the IB Business Division handled a total of 56 financial underwriting and advisory projects worth approximately 3.2123 trillion KRW. Vice President Lee said, "What small companies need most to grow is tenacity," adding, "Existing large firms are under financial holding company systems, so their tenacity differs from that of Meritz, which was built independently." He explained, "There is a white zone that everyone covets and a black zone that no one goes to. The white zone is highly competitive with low profits, and the black zone is a place where you shouldn't even put a spoon in." He continued, "Meritz enters the gray zone, which is the middle ground between the two, changes the business structure, and brings it into the white zone."

For example, five years ago, there was a project site that all financial institutions in Korea rejected during project financing (PF) reviews. Vice President Lee said, "I thought there was potential, and if we changed the structure slightly, the risk would decrease, making the project feasible." He added, "After much internal discussion, we decided to participate, and as a result, it has become a project that everyone now envies, wondering how such interest rates and fees were possible." He explained, "We must find opportunities in deals that everyone else ignores."

The Osan Hyundai Terra Tower CMC is another such case. Part of the LG Innotek site was put up for sale, and the buyer wanted to build a large logistics center. Vice President Lee explained, "A logistics center does not generate immediate cash flow by selling to general retail or individual buyers, so it carried significant business risk." He said, "We persuaded the developer to build part of the logistics center and develop a mixed-use complex including a knowledge industry center and officetels," adding, "By selling the knowledge industry center, officetels, and commercial spaces, we secured initial cash flow and were able to sell the logistics center to a well-known foreign company as completion approached." He hinted, "When completed early next year, it will be recorded as profit, and we expect an internal rate of return (IRR) of about 30%." Vice President Lee expressed confidence that they will actively tackle and resolve problems going forward. He said, "Due to COVID-19, partners have been hesitant and it has been difficult to move actively, but in tough times like these, Meritz will become more proactive in connecting customers, consulting, and leading them in new directions."