[Inside Chodong] The Old Bear and the Young Money

There was a bear in a circus troupe that was very skilled at performing tricks. Every movement of the bear was met with cheers from the audience. The circus director favored the bear greatly. The entire village made a living thanks to the bear's talents. The bear ate little but was exceptionally talented. As time passed, the bear's movements became sluggish. Its body grew larger, and it ate more. Meanwhile, a young bear from a neighboring village appeared, performing even more advanced tricks. The circus director sent a love call to the new bear. The old bear's outdated skills were now useless.

This is a story recently told by a veteran business leader, who once served as CEO of a major manufacturing conglomerate, during a meeting with a private equity fund manager. The old bear represents Korea, the young bear symbolizes emerging countries, and the circus director stands for the United States. This analogy was used to describe the current state of Korea's manufacturing industry, which has significantly lost its dynamism. Not only have competitors increased, but manpower, equipment, technology, and even entrepreneurial spirit have aged. Although industrial competitiveness has declined, the lives of the chairpersons have become comfortable due to accumulated capital. Their second and third generations show little interest in the manufacturing industry that their predecessors built from scratch. Instead, they dabble in industries that seem fancy. The same applies to mergers and acquisitions (M&A). Rather than strengthening the competitiveness of core businesses, they tend to choose unrelated industries that suit their tastes. Is the competitiveness of Korean manufacturing now only destined to decline?

It is a time when 'corporate rebirth' is necessary. What is needed when the dynamic power of a thriving industry gradually weakens? A hint can be found in the words of a capital market veteran who served as a CEO of a financial company for 27 years and recently stepped back. He said that now is precisely the time when the 'role of capital' is needed. His main point is this: capital must actively intervene in Korea's manufacturing industry, which is undergoing a generational change in human and industrial structures. This is to prevent foreign strategic investors (SIs) or funds from indiscriminately entering during ownership transitions, causing the mass outflow of Korea's core manufacturing technologies overseas or the collapse of major companies.

In Korea's industrial structure, which is small and dependent on exports, the manufacturing competitiveness honed over decades is an indispensable core asset. Capital added to aging industries can increase tension and efficiency, guiding corporate rebirth in a way that expands economic and social benefits. When the entrepreneurial spirit of first- and second-generation managers has run its course, funds that operate centered on capital and profits can play the role of 'young blood' that revitalizes the industry.

Of course, the 'vital capital' to be injected into 'old industries' must be different from past capital. Capital labeled with 'moral hazard' or 'corporate raider' must be avoided. Investment activities of buy-out funds that gather large-scale capital to revitalize aging companies and manufacturing require insight and capability that can foresee the future national industrial structure. Although money has no label, it must have a 'head (future strategy)' and a 'heart (moral responsibility).' This can be realized in various ways. Funds may take over large corporate divisions that need to be divested for future strategies, or companies and funds may join forces to acquire assets that are difficult to sell due to high valuations. Through the secondary market, funds can also sell assets to each other, contributing to the virtuous cycle of the economy. Capital that acquires companies based on financial strength and information power, streamlines management, contemplates future growth engines and industrial structures, and enhances corporate value?there is an urgent need for the role of healthy capital that finds new lifelines for the economy.