[K-INVESTORS]③ "Talk about the company first, not money... Building consensus with the acquired company's owner is important"

UCK Partners CEO Kim Sumin Acquires Management Rights of Osstem Implant
Thoroughly Understands Major Shareholders and Company Situation... Listens Carefully
Earns Sixfold Return on Investment Through Medit Exit

Editor's NoteThe Korean capital market is more turbulent than ever, driven by greed and selfishness. Manipulations and foul play are rampant. However, many investors have carved out their own investment worlds and emerged as role models for individual investors, having endured numerous crises from the foreign exchange crisis, dot-com bubble, global financial crisis, to COVID-19. Through meetings with these investors, we aim to convey the value of money through their war-like stories of the capital market, their philosophies, failures, and successes. Starting now, we bring you stories from experts across various fields?from chief investment officers of domestic pension funds reborn as value investors, activists, and global 'big players,' to leaders of private equity funds and asset management firms, and CEOs of financial companies.

"How did you persuade the chairman of Osstem Implant?"

We asked Kim Soo-min, CEO of UCK Partners, a private equity fund (PEF) that acquired management rights of Osstem Implant. We were curious about the secret behind persuading Chairman Choi Kyu-ok, beating out formidable foreign PEs.

Someone Who Understands Others' Pain Points and Listens Well

CEO Kim Soo-min never clashes with the owners of the acquired companies. He doesn't even bring up money first. Instead, leveraging his consulting experience, he thoroughly studies the company beforehand. When owners contemplate whether to sell the company they built, their feelings are inevitably complex. They want to sell at a high price but also wish to manage the company a few more years. At such times, Kim extends a hand. He proposes that managing the company alone without external help is too difficult in the current state, so let's manage it together with UCK for about five more years, grow the company, and exit (recover investment) together.

By presenting a different perspective from that of a consultant, the major shareholders find it more important who will grow the company rather than the current sale price. In the mergers and acquisitions (M&A) industry, buyout funds often have conflicts with owners. However, UCK, mainly composed of personnel from consulting firms, has a different atmosphere. They increase business understanding and rather utilize the owners as professionals. It is rare to acquire 100% of shares when acquiring a company. Usually, about 70% is acquired, leaving around 30% with the existing owners.

When visiting mid-sized companies, there is always a shortage of capital and manpower. Even if the fund brings in capital, manpower remains a concern. CEO Kim said, "If someone who can help the company is far away, we bring them in to work together, so there is no need to push out the owner who knows the company best," adding, "I always work together."

Of course, sometimes conflicts arise along the way. While legal solutions might be straightforward, that is not Kim's style. He keeps listening and persuading. He explained, "Owners feel like they are losing everything they built when a PEF comes in," adding, "They feel like the fund only talks about price, knows nothing about their business, and that the company is becoming strange." He does not see the world in '50-50' or 'black and white' terms. About 80% is a 'gray area.' He does not try to defeat or suppress the existing owners, nor does he feel the need to show who is smarter. Sometimes people around him say, 'Don't you have any pride?' But he thinks the opposite: to do deal sourcing well, you actually need high self-esteem. Kim said, "My job is to invest well and make money with money from pension funds, not to be told I'm smart," and "I listen carefully to others' stories for five or six hours if needed."

Kim Soo-min began talks with Osstem Implant early last year. By the end of last year, activist funds started buying Osstem Implant shares, threatening management rights. The owner's mind was very complicated, but few people listened to his concerns. Osstem Implant is a company with great future value, attracting interest from global funds. Many prestigious funds recommended selling. The main message was, 'We are a big company and can buy your shares at a high price.' Few funds had plans to constructively and forward-lookingly address the owner's concerns about company image, damaged reputation, personal debts, and succession issues.

Having managed Medit and gained a deep understanding of the dental field, Kim met Chairman Choi through an introduction by a dentist. While funds usually come through introductions from securities firm CEOs or lawyers, Kim met the chairman through a personal acquaintance. His positive relationships with dentists while operating Medit helped in securing this new deal.

Owners of mid-sized companies generally have many doubts and strong attachments to their businesses, having built them up through self-made efforts. If you belittle their business or start with money talk, they rarely give you a second look. If the owner is indifferent, funds often do not return. But Kim keeps going back. When he thoroughly investigates and analyzes the major shareholder and the company's situation, he can see the deal. Kim said, "At first, everyone says they won't sell, but actually, they are just pretending not to," adding, "If I am convinced that a deal is inevitable, I keep going back." He continues to listen to the company's owner. After about ten such meetings, the owner first says, "You should talk a bit." That is when Kim opens his mouth. This is the secret behind UCK Partners, unfamiliar to the public, securing management rights of Osstem Implant, the number one implant company in Korea with a market cap nearing 3 trillion won.

A 'Last Place Sensibility' Holder Who Digs In When Interested

Although Kim, a Seoul National University Business Administration graduate, is often assumed to be a model student, that is not the case. In middle school, he ranked 55th out of 60 students. He has a 'last place sensibility.' At that time, he only cared for his older brother, who was a high school senior, and felt no one at home paid attention to him, so he just hung out with friends. After a long period of playing around, there was talk he might not get into high school. Hearing this sparked determination. He barely passed the joint high school entrance exam cutoff with last-minute cramming and entered a humanities high school. He started studying seriously from the second year of high school. Kim never does things because someone tells him to, but when he has a goal, he works very hard, starting from the basics, from the bottom.

Kim's career in investment banking (IB) started from consulting. He gained global IB and consulting experience at Goldman Sachs and Bain & Company. Rather than viewing companies limited to financial statements or capital returns, he looks at how to transform companies and organizations within the overall industry flow. UCK hires many employees specialized in consulting.

For example, when considering acquiring a food and beverage company, he visits all 50 stores, conducts customer surveys, and collects even information unknown to others. Then, when meeting the owner, the conversation changes. While other PEs talk numbers, he starts with, "I visited the 00 store last week," which changes the owner's gaze. Investment terms are postponed, and he talks about things even the chairman did not know, like "I really want to eat there, but there are no franchise stores in that area." Owners then want to talk longer and meet again. Such thorough prior research greatly helps not only investment decisions but also deal sourcing.

Kim's achievements are recognized to the extent of being used as a Harvard MBA case study. Through his first blind fund, he successfully closed eight buyout deals, including the global milk tea brand Gongcha, wedding hall operator Apelgamo, food ingredient import and distribution company Gourmet F&B, and health supplement distributor FND Net, and exited six portfolios. The Gongcha deal yielded six times the principal in five years. It is cited as a model case of buyout investment, studied at Harvard MBA. Through the second fund, he invested in Medit, Oasis Market, and Haksan, famous for the Terarosa brand. Among these, Medit achieved a sixfold return on investment and a successful exit even during the COVID-19 pandemic.

Enduring with Guts Even Without English or Funding

Kim did not always have a smooth path. His understanding of owners' hardships comes from his own tough business experiences. After graduating from university, he joined global consulting firm Bain & Company. They promised to send him to an MBA if he performed well, so he worked hard for three years. He then started an MBA at Columbia University in 1998 and graduated in 2000. Afterwards, he joined Goldman Sachs and worked in Hong Kong. At that time, there were no 'native' Koreans like Kim who studied in Korea at Goldman Sachs. After the foreign exchange crisis, Goldman Sachs Hong Kong had many tasks with the Korean government. They had been hiring only English speakers but needed someone fluent in Korean, so Kim was luckily hired. Kim recalled, "There were painful days when it took me five hours to write a memo that others wrote in 30 minutes." He changed his mindset, thinking, "I'm not the employee who speaks English worst at Goldman Sachs, but the one who speaks Korean best."

While working at Goldman Sachs, Bain & Company called him back. He became a partner in 2006 and served as vice president for five years. He was in charge of the PE group, which was just emerging. Mostly foreign PEs existed, and domestic PEs rarely handled buyouts. Thinking this field would succeed, he left Bain & Company in January 2011 to start his own business. Things were not easy. He spent a 'nameless' period until July 2013. Despite meticulous planning, funding was difficult. Those who had agreed to join left, and he was left alone.

He endured with confidence that even if he failed, he could return to consulting somewhere. However, he reached a point where he had to sell his car and tell his family he would have to take the subway. Still, he firmly decided, "I must endure. This is a long game." People think, "Suddenly, he succeeded," but he went through hardships. When he felt like dying, there were people who helped him. Gradually, things started to work out from 2013.

If he had known it would be this hard, he would not have quit his job. He said, "The PE group I was in at Bain almost monopolized the market, so projects came in even if I did nothing," adding, "But I left because I wanted to work longer." Ten years after his 'nameless' period, in 2023, UCK is now a recognized PE in the investment industry. He said, "If the financial market conditions had been better, we might have exited Medit at eight times, but six times is a good result," and laughed, "Especially last year, when limited partners (LPs) struggled with liquidity, they were very pleased when we made profits with Medit."

Managing others' money and growing it is never easy. Work continues even after hours. Kim recently had ear surgery, wears a bandage, and still visits factories nationwide today. These factories will achieve greater growth based on Kim's meticulous planning.