[Private Equity Network Analysis⑤] The Heyday of Lawyers and Accountants as Professionals

Elite Alumni from Kim & Chang Active Across the Industry
Several Powerhouses Led by Accountants, Including IMM PE and JKL
Lack of "Field Sense" Sometimes Hampers Success, as Seen with Homeplus

Editor's NoteIt has been 20 years since private equity funds (PEF) for buying and selling companies were first registered in Korea. The market, which was only 200 billion won in 2005, has rapidly grown to over 140 trillion won. As seen in the Homeplus incident, private equity funds now affect the daily lives of ordinary people. We thoroughly investigate who the key figures are that dominate the domestic private equity industry.

Professionals such as lawyers and accountants, who are welcomed everywhere, are also active in the private equity (PEF) industry. Based on their experience advising on mergers and acquisitions at law firms or accounting firms from the early days of private equity, they have moved from being 'coaches' to directly becoming 'players.'

Popular Specialized Lawyers from Law Firm M&A Teams

Lawyers are considered a minority in the private equity industry compared to those from investment banks (IB), accountants, or management consultants. This is because there has always been a steady demand across various fields, and the potential to receive enormous compensation was significant. Nevertheless, there are elite lawyers who make their presence felt in the private equity industry.

Figures from Kim & Chang, the largest domestic law firm, secured positions early on in major private equity funds. Kim Kwang-il, a first-generation member and vice chairman, was active as an M&A specialist lawyer at Kim & Chang before joining MBK Partners in 2005. Park Tae-hyun, a partner considered a next-generation leader at MBK, is also a Kim & Chang lawyer who graduated from Seoul National University Law School.

Park Byung-moo, former CEO of VIG Partners (formerly Bogose Fund), who has now retired as an advisor, is also from Kim & Chang. He graduated from Seoul National University Law School, Yonsei University Graduate School of Business (MBA), and Harvard Law School in the United States. After gaining various experiences as a lawyer and corporate CEO, he joined VIG Partners in 2011. He currently serves as co-CEO of NCSoft. Jung Yeon-bak, vice president of VIG Partners, also worked at Kim & Chang in the M&A and PEF teams advising on various transactions until joining VIG Partners in 2009.

Additionally, Han & Company recently recruited Vice President Kwon Yoon-gu from Kim & Chang in 2023. He worked as a lawyer at Kim & Chang since 2001, providing top-level legal advice on various M&A transactions related to private equity. During his time at Kim & Chang, he also worked with Han & Company on acquisitions such as SK Shipping and Hanon Systems' Magna Group hydraulic business unit.

They have an advantage in managing legal and regulatory risks. They can precisely design transaction structures by thoroughly understanding legal pitfalls in M&A contracts, equity structures, contingent liabilities, and litigation risks. Their ability to close deals in complex regulatory environments is especially praised. They are also skilled in corporate restructuring, leading legal procedures such as rehabilitation, bankruptcy, and creditor negotiations.

PEFs Founded by Accountants Rise to Domestic 'Big Firms'

Accountants established themselves early in the private equity industry and began to thrive. They meticulously analyzed income statements, balance sheets, and cash flow statements to identify 'undervalued companies.' Even after acquisitions, they emphasized financial improvement, strengthening internal controls, and designing key performance indicators (KPIs) to enhance corporate value.

IMM Private Equity and IMM Investment are representative private equity funds founded by accountants. In an industry dominated by foreign backgrounds, these purely domestic accountants united to launch these funds. They have since grown into the 'big brothers' of domestic native funds.

Song In-jun, CEO of IMM PE, graduated from Seoul National University’s Business Administration Department and Graduate School, then joined the accounting firm Arthur Andersen (now Deloitte Anjin). After experiencing accounting due diligence and M&A advisory, he gained substantial experience at Korea Comprehensive Financial. After passing through CKD Venture Capital and others, he decided to start a company and founded IMM & Partners, a restructuring specialist company (CRC), in 2001. IMM Investment was born in 2004 after merging with IMM Venture Capital, founded by Dong-woo Jang and Seong-bae Ji, who were from Samil Accounting Firm. IMM PE was then spun off in 2006.

Because the founders were accountants, IMM has an unusually high number of accountants. Kim Young-ho, head of investment at IMM PE, was an accountant who worked at major accounting firms such as Samil, Anjin, and Sandong (now Samjong KPMG). He joined IMM after receiving an offer from CEO Song In-jun, his senior from Seoul National University’s Business Administration Department. By 2023, Byun Jae-chul, appointed CEO of IMM Investment, had joined IMM Investment in 2014 after working at Samil Accounting Firm.

JKL Partners also started as an accountant-centered company. After accountants Jung Jang-geun, Kang Min-gyun, and Lee Eun-sang, all from Samjong Accounting Firm (now Samjong KPMG), became independent as a CRC in 2001, the company established itself as a PEF from 2008. The company name JKL is derived from the first letters of the three CEOs' names.

Although they are accountants, they focused not only on simple investment value and numbers but also on shareholder value. In 2017, they were the first in Korea to introduce the Stewardship Code. This is a guideline that institutional investors use when exercising voting rights as shareholders. It aims to faithfully fulfill shareholder roles and transparently report to the public or clients who are the owners of entrusted funds.

Strong Majors but Variables Arise 'On the Ground'

While lawyers and accountants excel in negotiation and interpretation skills when designing complex transaction structures or clauses, reducing legal loopholes, they sometimes overlook the 'field,' which can cause setbacks. Such cases often occur in distribution and consumer goods industries, which are heavily influenced by consumer public opinion. An IB industry insider explained, "In PE, you are responsible for managing the companies you invest in, so if you bring the work style and sensibility from your previous accountant or lawyer days as is, you may experience trial and error. You need to closely understand not only numbers and legal clauses but also the internal field of the company and market trends."

The recent uproar over MBK’s Homeplus corporate rehabilitation filing is a representative example. Kim Kwang-il, MBK’s vice chairman and co-CEO of Homeplus, is both an M&A specialist lawyer and a certified public accountant. While he managed legal risks meticulously with a high-risk structure approaching an 80% leverage ratio, he underestimated operational risks such as market changes. Of course, not all market predictions can be accurate, and not every investment can succeed. However, after the failure, it was evaluated that they missed the field and public opinion from a risk management perspective. They filed for corporate rehabilitation abruptly, focusing only on financial risks while overlooking Homeplus’s significance in people’s daily lives and the livelihoods of many suppliers.

An IB industry insider said, "Since the overall fund returns had already been achieved, they might have judged that cutting losses on Homeplus would not be a big problem. This is a similar trial and error often experienced by many PE industry people who have worked with a small number of elites, not just lawyers."