Chapter 97
Chapter 97
Industrial capital and financial capital are the two wings that lead the economy.
In order for an industry to grow, finance must be the foundation, and for finance to make a profit, the industry must develop.
Korea has traditionally had strong industrial capital. There are many world-famous companies like Suseong Electronics and Eunsung Motors, but it can be said that there are no world-famous financial companies.
The power of finance is huge enough to be comparable to that of industry.
If you ask where is the richest company in Korea, everyone will pick Seosung Electronics. However, it is the National Pension Service that actually rolls the most capital.
Currently, the assets of the National Pension Service are about 600 trillion won.
The money paid by tight belts for a living without the people gathered to create a huge institution that more than doubles the market capitalization of Suseong Electronics.
The National Pension Service invests its vast capital not only in the domestic stock market, bonds and real estate, but also in other parts of the world.
“In the case of the Norwegian sovereign wealth fund, the capital exceeds 1 trillion won.”
Taek-gyu opened his mouth wide in surprise.
“What? Thousands?”
The world is big and there is a lot of money.
Compared to this, the money we have will still be nothing more than new blood.
In addition to government-run sovereign wealth funds (SWFs), private equity funds (PEFs) run by individuals run tens to hundreds of trillions of dollars.
Financial capital has devoured numerous companies with money. If you know franchises, supermarkets, insurance companies, savings banks, etc. that you might know just by hearing their names, they often own private equity funds.
I read the material I received from Hyunjoo noona.
X-Cop is a privately held company owned by Typo Group of the United States, and put it up for sale 15 years after its acquisition.
Morgan Stanley was appointed as the manager of the sale early on.
Even if it sells for only 2.5 trillion won, Typo Group will make 2 trillion won in profits. It is more than that if you include the money received through management consulting and dividends.
Even before the preliminary bidding began, Typo Group said in an interview with the media that Xcop was worth more than 3 trillion won and that it would not sell it at a low price no matter how urgent the money was.
Then, large corporations and private equity funds wishing to take over said, ‘3 trillion won is a ridiculous amount. 2 is expensive too. I would rather not participate in the bidding.”
Of course, both are just bluffing.
Typo Group needs cash right away, and large corporations and private equity funds want XCop.
What matters is how valuable it is… … .
Listed companies are already valued in the market (though that’s not necessarily true).
However, it is difficult to evaluate the value of unlisted companies.
According to the financial statements, Xcop’s equity capital is about 400 billion won. It is the total price of deposits, land, buildings, vehicles, and equipment.
The value of equity capital does not necessarily match the book. This is because the actual value of the deposit is the same, but everything else is different.
There is no guarantee that bills or bonds will receive their full amount on the maturity date, and other equipment, even though it is listed as expensive in the books, is cheap when sold.
Even with equity, the value of goodwill varies from as little as 10% to as much as twice as much, depending on who calculates it and how.
If Xcop is worth KRW 2.5 trillion, the remaining KRW 2.1 trillion excluding equity capital of KRW 400 billion is the value of goodwill.
Current number of customers, sales, operating profit, future growth potential, etc.
Xcop’s main business areas are security, security, development and sales of security systems, and building management. Among them, security services provided to schools, government offices, shops, houses, apartments, and shopping malls generate the largest revenue.
Why don’t you sometimes see a movie scene where you look at hundreds of monitors in a situation room or something, and communicate via walkie-talkie?
Although related industries are currently on a growth trend centering on corporate demand, there are also a number of negative factors.
As I looked through the documents, I sighed.
“It’s very complicated.”
Sellers want to sell as high as possible, and buyers want to buy as cheap as possible.
The price is determined at the point where the interests of both parties meet.
The question is, where is that point?
Although I am the CEO of OTK Company with a net worth of more than tens of trillions, in reality, I am just a young man in his mid-20s who has not yet graduated from college.
“It’s nothing compared to CEOs who run private equity funds or M&A experts.”
Taegyu said.
“Instead, you have special abilities that they don’t have.”
“It’s nice to have that.”
How much else are you thinking about?
Article 2? Article 3? Or more?
It’s a problem that will be easily over if you buy five sets and go and say ‘I’ll live’. But if you do, only Typo Group and Morgan Stanley, who oversees the sale, will do you a good job.
“Moreover, it will be certified as a global hogu.”
“Do I even need to get my hands on it like that?”
“I’m worried because there isn’t.”
From our point of view, X-Cop is a company that it is good to have or not to have. Even so, I have no intention of letting Eunseong Cha take it easily.
Ultimately, there are two strategies.
“We either take over it at a reasonable price, or make it take over by Eunsung Motors at a very high price.”
* * *
8 o’clock in the evening.
We had a separate seat with Sangyeop sunbaenim after a long time.
The menu was Sir Sangyeop’s favorite sirloin. Because of the CEO’s taste, K Company’s employees toured the Gangnam side sirloin restaurant at every dinner party.
Now, the time has come for the employees to say please eat pork belly.
We were guided to a private room that had been reserved in advance. This time, senior Ki Hong was also with us.
Did you beg me to take you too?
Beer was served while the staff grilled the meat. Senior Ki Hong politely held up a beer bottle and said,
“I’ll pour you a cup, sir.”
“It’s a private person, so just talk to me comfortably.”
Senior Ki Hong looked into my eyes.
“Is that so?”
Sangyeop said as he loosened his tie.
“Do what Jinhoo says.”
“Okay!”
When I was a freshman, I remember getting lessons from Ki-hong senior every day. But as time passed, I started to buy beef from senior Ki-hong with a corporate card.
After clinking the glass a few times, his tension seemed to ease a bit, and senior Ki Hong returned to his usual smile.
“If it wasn’t for this, would you keep hiding it?”
“I do not know.”
It was just a time difference anyway, and it was a matter that would one day be known. However, he would not have personally announced it publicly.
“It was a bit sad though. Just give me some advice.”
“… … .”
If that was the case, wouldn’t the entire nation have known before the press conference?
We ate meat and started talking in earnest. When I told the story I heard from Hyunjoo noona, Sangyeop asked.
“The sale of X-Cop? Why?”
“Because I’m interested.”
Senior Ki Hong said quickly.
“It’s not a joke on the face of the companies we are participating in now. Among large companies, Eunsung Motor Group and Lite Group, among private equity funds, KRR, TM Consortium, Citigroup, Golden Gate PIA… … Here, the world’s largest private equity fund, Kanline Group, and Korea’s largest private equity fund, RCK Bros. Judging from the list of participants, it is the most spectacular among M&As in the Korean market.”
“You know it well.”
When I put on a surprised expression, senior Ki Hong laughed.
“I was originally interested in that. However, I know that RCK Bros doesn’t have much money because it recently acquired a stake in Buy One.”
Buy One is a beverage company founded by Swiss company Letsle in a joint venture with a Chinese company to advance into China. Letsle withdrew from the Chinese market and sold 49 percent of its stake, which was recently bought by RCK Bros.
The amount is 12 billion yuan, equivalent to 2 trillion Korean won.
Sangyeop senior said.
“I heard that Temasek is going to be an anchor LP again.”
When a private equity fund creates an investment fund for the purpose of raising funds, wealthy individuals, pension funds, sovereign wealth funds, and financial institutions invest the necessary funds.
These are called LPs (Limited Partners, investors), and the main LP among them is called anchor LP.
Senior Ki Hong nodded his head.
“I’m going to give you live ammunition from behind again this time.”
“That’s how much I believe in Chairman Ryu Cheol-gyun.”
Temasek is a pension fund management fund 100% owned by the Ministry of Finance of Singapore, and has been a cooperative relationship with RCK Bros.
“I really wanted to go into RCK Bros.”
Since high school, Ki-hong has been interested in M&A and private equity funds. So, even though he joined KYB Investment & Securities, he resigned saying that his job was not suitable for him, and tried to join RCK Bros. but failed.
He wandered around for a while, and then joined K Company.
“Are you going to move? May I write you a letter of recommendation?”
At my words, Ki Hong-senpai was indifferent.
“What do you mean, sir? I will bury the bones in K Company.”
Seeing you say this, it turned out to be a good thing.
“From the perspective of Typo Group, it was forced to sell because of accounting fraud, but the timing was good. It will probably be more successful than expected.”
The success of the sale depends on the market environment. In boom times, they try to buy them even at a premium, and in bad times, they don’t buy them even if they are offered at low prices.
Although it is difficult to feel it, the world economy has recently entered a booming period.
There were some shocking events such as Brexit or Ronald’s election (?) in the middle, but it was not enough to dampen the growth.
With the advent of new industries, new companies were born endlessly, and the sales and profits of global conglomerates increased.
Of course, the financial world is the first place to feel this boom. Stock prices are rising, IPOs are continuing, and financial companies are making huge profits.
Thanks to this, a money feast has continued in the financial sector since last year. CEOs of well-known financial companies such as JP Morgan, Moody’s, Morgan Stanley, Citigroup, Deutsche Bank, Rothschild, and Macquarie have earned tens of millions of dollars in salaries through incentives and stock options.
The market was overflowing with liquid funds wandering in search of investment destinations. Some of this liquidity flowed into private equity in pursuit of high returns.
“A lot of private equity funds now have their funds full through blind funds.”
Taek-gyu asked.
“What is a blind fund?”
“Raising funds first without setting an investment target.”
In a nutshell, the decision on where to invest is left solely to management.
If you make a mistake in investing, you can incur huge losses, so unless you are a well-known private equity fund, you cannot even dare.
“What do you think, senior? Which one is most likely?”
“Isn’t the Eunsung difference the most likely? Kanline Group and RCK Bros. are also worth noting. The Kanline Group reorganized its ranks by replacing the Korean representative.”
That’s enough, it wouldn’t be strange if either side took it.
It really is a war of stars.(Read more @ wuxiax.com)
I think it will be difficult for some reason, so I want to try more. It doesn’t matter if you fail anyway.
I brought the point out.
“OTK Company is also trying to participate in the acquisition.”
“What?”
Sangyeop and Kihong were surprised at my words.
“I’m serious?”
“Yes. It would be nice to have a security company. They are reluctant to entrust the most important issues to other companies.”
Senior Ki Hong said.
“Will the security sector grow in the future?”
“The security space may grow, but it is certain that we will.”
As the size of the holding companies grows, so will the demand for security. In addition, we have several companies both domestically and abroad. It is also possible to explore overseas markets depending on your will.
After thinking for a moment, Sangyeop-senpai nodded her head.
“If the price is right, it will be fine. But there are too many great candidates. If done wrong, the acquisition price can be exorbitantly high.”
“Do not worry. If you don’t want to, I’ll walk away.”
“How do I bid for real love? We don’t have experts there.”
I’ve already thought about that.
I said while drinking beer.
“We will form a consortium with Golden Gate.”
* * *
next day.
I met Hyun-joo’s sister and Ellie along with Taek-gyu and Henry to discuss the formation of the consortium. And the conditions were confirmed on the spot.
The stake is 7 to 3. If the acquisition is successful, the condition is that OTK Company will receive a senior loan from Golden Gate for 80% of the acquisition funds.
Considering the value of OTK Company, it can be said that there is no fear that the senior loan will be taken away. On the lender side, it is a business that swims on the ground.
Of course, this is only when the acquisition is completed. If you fail, you will end up wasting the cost of due diligence.
* * *
Rumors that OTK Company and Golden Gate are going to take over Xcop quickly spread throughout the business and financial circles.
“Are you planning to incorporate Xcop as an affiliate?
However, those who knew about the bad relationship between Jin-hoo Kang and Seong-cha Eun had a different opinion.
“Is this for drinking Eunseong tea?
The important thing is that OTK Company has made almost all investments so far.
As the exhibitors were buzzing all at once at the appearance of a strong competitor, the date of the preliminary bidding approached.
