이 기사는 2020년 01월 30일 08:00 thebell 에 표출된 기사입니다.

Shin Chang-hoon, who once wanted to be an entrepreneur, founded his company providing Partner Relationship Management (PRM) solutions in 2000 even before graduating from college. The company, however, lasted only three years before going bust.

The then young man, who is now Managing Partner of South Korea’s private equity firm VIG Partners, joined Boston Consulting Group (BCG) in 2003. Shin learned many things – including why his business failed – while working there as a consultant for various companies and M&A transactions.

But he wanted more. After learning by experience that running a business is all about people and money, Shin decided to pursue his career in private equity. In 2005, he joined VIG Partners, formerly Vogo Investment, where he has been working for 16 years until now.

Investment in Tong Yang Life Insurance

Since the Private Equity Fund Act was enacted in 2005, many small and large private equity firms have been created in Korea. Among them, VIG Partners – one of the country’s first-generation private equity firms – is known for its specialty in hands-on investments in mid-market companies. It mainly targets mid-sized companies in the growth stage, most of which are run by owners and have difficulty moving to the next phase of growth.

Dealing with hands-on investments requires managers to endure a heavy workload, and that’s why not only their passion but their aptitude is also important in this job. Shin, who says solving problems faced by portfolio companies was more enjoyable than anything for him, seems just cut out for the job.

The most memorable investment during his 16-year career is probably Tong Yang Life Insurance, which VIG Partners acquired about 15 years ago. The private equity firm exited from its investment in 2015 by selling a controlling stake in the insurance company to China's Anbang Insurance Group.

Two years after the exit, however, Anbang filed a compensation claim with VIG as Tong Yang Life suffered a loss due to distressed loans, which Anbang argued were hidden during due diligence for the acquisition. The legal fight is still ongoing. With VIG’s investment in – and exit from – Tong Yang Life, Shin has gone through most of the hardships that private equity managers could face.

Diversifying the fund’s portfolios

Based on experience from its investment in Tong Yang Life, VIG Partners invested in funeral-service company Jounlife, its second portfolio company in the financial sector. The business model of Korean funeral companies is similar to that of insurers, while less exposed to risks from the reverse margin due to a drop in interest rates.

VIG Partners focused on the fact that the funeral-service industry entered into the shake-out phase. Jounlife is the first investment that VIG made through its third fund in 2016. Currently, Shin is actively involved in enhancing the competitiveness of the company.

The acquisition of foodstuffs retailer Winplus by VIG in 2018 was also based on experience from its investment in fast-food chain Burger King in the past. Last year, Winplus purchased Hanwha Hotels & Resorts' food service business unit. The deal was the result of VIG’s continued efforts to source good investment opportunities.

Shin says that a great deal of time and effort needs to be put to “meet” good deals. Especially in the mid-market space, one of the most important things in deal-making is the relationship with owners of companies, through which private equity managers could learn information about real problems faced by companies. Then, they can propose effective solutions.

Direction and people

Shin thinks setting a clear direction and building a relationship with management of portfolio companies are the two most important things in investment.

“Private equity managers are asset managers, not entrepreneurs,” he emphasized. It is private equity managers’ duty to increase the value of portfolio companies by setting a clear path for improving profitability. Without this, clear communication between private equity managers and management of portfolio companies cannot be achieved, either.

He also puts his focus on people. Especially, he thinks that the relationship with management of portfolio companies in early stages determines the success of investments. In this light, VIG Partners has the advantage as one of the country’s first-generation private equity firms, with a large pool of talents built up for the last 16 years since the firm’s inception.

Shin is passionate about sourcing new investment opportunities, too. He has continued to pay close attention to the healthcare sector. Another area of interest for him is the pet food and supplies market, though he thinks that the pet market is still in an early stage of development in the country.

Shin considers himself lucky in his career. But many people who know him say that he lives his life fiercely, dubbing him “energizer.” Last year, he was promoted to Managing Partner at the firm where he joined in its first year. Now, as a senior manager and expert on mid-market businesses, he is playing a pivotal role in the development of the country’s private equity industry.

(By reporter Han Hee-yeon)