"Networks Built at DCM Also Proved Effective in IPO"

Interview with Park Sung-won, Head of Investment Banking Division at KB Securities (Vice President)
Expanding expert workforce without layoffs despite recession
Overcoming league table hurdles through relentless effort
Aiming to be a partner in corporate lifecycle and growth management

The battle among domestic investment banks (IBs) is intensifying. Ultra-large IBs with over 4 trillion won in equity capital are increasing their capital and continuously expanding their organizations based on high profitability. The funding weapon called issuance of promissory notes has multiplied their financial power to target profitable deals. Small and medium-sized securities firms have also significantly boosted their financial power by increasing profits in project financing (PF) businesses. With market liquidity pouring into the investment market, the IB market is expected to enjoy a record boom. We hear from the heads of securities firms’ IB divisions about their market outlook and survival strategies.

Sungwon Park, Executive Vice President and Head of IB1 at KB Securities

[Asia Economy Reporters Jeongsoo Lim, Soyeon Park] KB Securities has emerged as a rising power in the initial public offering (IPO) market. KB Securities was selected as the lead underwriter for the LG Energy Solution IPO, considered the largest since the establishment of the Korea Exchange, as well as for KakaoBank, Kakao Entertainment, One Store (a subsidiary of SK Telecom), and Hanwha Total Petrochemical. Until last year, large IPO underwriting was mainly handled by Mirae Asset, Korea Investment & Securities, and NH Investment & Securities, but this year the market landscape has changed. What is the secret behind KB Securities, which is not even among the big three houses, securing all the major big deals this year?

Park Sung-won, Head of KB Securities IB1 Division, said in an interview with Asia Economy, "It was the network with corporate clients built through DCM (debt capital markets) that made the difference." He emphasized, "With the competitive sales network that has ranked first in DCM eight times in a row, we will provide differentiated services that manage the corporate life cycle from startups to large corporations."

Last year, KB Securities underwrote large corporate bond deals including SK Hynix (1 trillion won), LG Chem (900 billion won), LG Uplus (700 billion won), Hotel Lotte (700 billion won), S-OIL (680 billion won), Hyundai Motor (600 billion won), and Kia (600 billion won). Additionally, it led 1 trillion won rights offerings for Korean Air and POSCO Chemical respectively.

Park said, "KB’s strength lies in its deep understanding of corporate concerns and status through handling numerous corporate bond issuances." He added, "We also prepared by expanding the IPO team even when there were no deals, by recruiting experts and training new employees." He continued, "Because we were desperate, executives reviewed IPO proposals down to the last detail until 2 a.m. We practiced presentations and studied everything together from start to finish. This is the achievement of the organization."

After much effort, KB Securities has consecutively secured IPO underwriting for major large corporations since last year. Their record is 8 wins out of 10 bids. The only companies that rejected their proposals after receiving the request for proposal (RFP) were Krafton and SK IET. Park said, "Generally, in bidding, companies tend to overestimate their corporate value, but we took a different strategy." He hinted, "We submitted proposals that thoroughly offered reasonable prices and advised from the market’s perspective on the company’s fundraising story and post-IPO growth strategy."

To target large deals, KB Securities signed a business agreement with Jefferies, one of the world’s top six securities firms, for domestic stock brokerage services targeting overseas clients, preparing for overseas sales as well. As the proportion of general public offerings increased, KB Financial Group’s high-net-worth client network became a solid support for demand. During the COVID-19 situation, they actively utilized ‘Queen,’ a non-face-to-face platform and database where all employees share market information.

It is also analyzed that their method of discovering and investing in ‘promising’ companies in a pre-IPO form was effective. Park Sung-won introduced, "The model of understanding industries and serving as a partner through pre-IPO investments was helpful. Representative examples include investments in new growth companies such as Prestige Bio, WCP, and StradVision."

KB Securities plans to strengthen not only IPO underwriting this year but also global bond issuance, early-stage corporate investment, mergers and acquisitions (M&A), and advisory for large corporate spin-offs. Park Sung-won said, "The era of IBs has come, replacing the era of private equity (PE) that easily buys and sells companies like goods." He added, "New Deal policies that induce new investments are accelerating the IB era, and we will continue to increase IB personnel."

This content was produced with the assistance of AI translation services.