[Asia Exclusive] IMM PE Improves Portfolio Company Value to Foster 100-Year Enterprise Growth and Support Social Stabilization

Direct Approach - Asia Invitation
Kim Young-ho IMM PE Investment Division Head

Kim Young-ho, CEO of IMM Private Equity, is being interviewed on the 23rd at the Gangnam Finance Center in Seoul. Photo by Kang Jin-hyung aymsdream@

Top Domestic Native Private Equity Fund Leader

Rather than aiming to hit the jackpot and retire early,

the goal is to build a company that lasts over 100 years

Playing a major role in maximizing the value of investment assets

Able to return better profits to investing pension funds and financial institutions

PEs show interest in secondary battery and healthcare industries

Atmosphere of conserving ammunition until the first half of next year

[Interview by Lim Jeong-su, Head of Capital Markets Department, Asia Economy; Organized by Park So-yeon, Reporter]

‘humble dignity’

Kim Young-ho, CEO overseeing the investment division of IMM Private Equity (IMM PE), the top native private equity fund in Korea, meets investment clients with these two words in mind. Kim said, "Our goal is not to invest with the mindset of hitting a big jackpot and retiring early, but to create a company that can sustain for over 100 years," adding, "I want to build a company that can be passed on to juniors and, furthermore, become a representative investment company of Korea." IMM PE was established in 2006, the dawn of private equity investment in Korea, and has over 15 years of experience. Currently managing assets worth about 7 trillion KRW, its short-term goal is to grow to 10 trillion KRW by 2025. IMM PE, which has shown an average annual growth rate of 31% since its founding, is strong in mid-to-large buyout deals. It manages significant portfolios such as Airfirst, Shinhan Financial Group, and Hana Tour.

- Portfolio companies have been hit hard by COVID-19. Are there any future growth strategies that investors can refer to for each company?

△ Among IMM PE’s portfolio companies, Airfirst has achieved over 30% annual sales growth since the COVID-19 pandemic began in 2020. Airfirst is a top-tier domestic industrial gas supplier serving major Korean front-end industry clients such as Samsung, SK Hynix, and LG Chem. The supply contracts with key clients include clauses guaranteeing minimum sales and allowing price increases to offset electricity cost hikes, which helped maintain margins despite supply chain and inflation issues caused by the pandemic and its aftermath. What investors can learn from the Airfirst investment is that during times of heightened uncertainty like now, companies with business structures that block downside risk and can pass on cost increases to prices, like Airfirst, and that have additional growth opportunities, should be closely watched. This approach can help find opportunities for excess returns even in difficult markets.

- Are there any investment sectors or companies you are currently paying close attention to?

△ We should focus on companies with unique technological capabilities that belong to the value chain of growth industries. Companies that are excessively undervalued in a high-interest and inflation environment, companies with high market share and technology but facing difficulties in financing due to high interest rates, and companies providing competitive products and services in overseas markets deserve attention.

- What growth potential and opportunities did you see in the recent investment in Megazone Cloud?

△ Megazone Cloud was spun off from Megazone, an IT hosting company, in 2018 and is a leading cloud MSP (Managed Service Provider) in Korea. It provides comprehensive services to help companies transition to cloud work environments. Well-known global CSPs (Cloud Service Providers) like Amazon Web Services, Microsoft Azure, and Google Cloud Platform inherently focus on the digital enterprise value chain. In areas related to customers, companies inevitably rely heavily on MSPs like Megazone Cloud. We judged the market situation, where corporate clients’ cloud transition needs are increasing due to the spread of remote work, to be favorable. The company held about a 50% market share in 2021. These factors were key investment points.

- What was IMM PE’s biggest achievement in the first half of this year?

△ Above all, the biggest achievement was the investment in Hanssem. We acquired management rights through thorough due diligence and review in the second half of last year. Starting this year, we have been conducting a corporate value improvement project for a second leap forward. We are exploring various value-up measures and implementing them one by one. The second achievement is the expansion of specialized personnel to support IMM PE’s further growth. Considering the rapid global interest and development in tech, we hired experts in the tech field. Also, as investor interest in infrastructure-related assets that can steadily generate profits even in a rapidly changing financial market environment is increasing, we hired infrastructure asset specialists. The third achievement is proactive investments in industries related to the Fourth Industrial Revolution. Noting the rising demand for robots to respond to demographic changes such as aging, we invested in Bear Robotics, a growing company in Silicon Valley, USA. The previously mentioned investment in Megazone Cloud shares the same context.

- What are PE firms’ interests from the second half of this year through the first half of next year?

△ Many PEs are interested in the secondary battery or healthcare industries. Fierce competition is expected if companies with excellent competitiveness in these growth industries come to market. However, until the first half of next year, the industry as a whole is expected to conserve ammunition and prepare for the next cycle. Although valuations of many companies have dropped to attractive levels, it has become difficult to enhance returns through leveraged buyouts in a high-interest rate environment. Various macro issues add uncertainty, so potential sellers are reluctant to put assets on the market. PE dry powder remains at record-high levels.

- Since the revision of the Capital Markets Act last year, have there been any specific changes within the capital market PE groups?

△ From the perspective of PE operators (GPs), it has become possible to form funds with more flexible investment targets and strategies. Previously, separate PEFs were formed for venture capital, growth capital, private debt, buyouts, etc., but now a legal foundation has been established allowing any investment target and strategy, except for personal loans, to be pursued within a single PEF. Leading PE operators including IMM PE are diversifying their investment strategies. For example, IMM established a separate management company called IMM Credit & Solution to explore credit investment opportunities. Although expected returns are somewhat lower than buyouts, they are discovering and investing in credit strategies that allow for more stable investment recovery.

- What do you think is the role of PEFs in our society?

△ The biggest role of PEFs is to maximize the value of investment assets by improving the corporate value of the companies they invest in. Through this, they can return better profits to many pension funds and financial institutions investing in PEFs. To improve corporate value, PEFs perform independent and multifaceted strategies. First, during the investment review and due diligence process, they conduct PMI (Post-Merger Integration) on areas that can be improved. Then, they optimize core competencies in the company’s main business to enhance management and financial efficiency. They support capital expansion to secure new growth engines, additional M&A investments such as bolt-on acquisitions, and the use of intangible networks. When these value-up activities are executed, companies grow and can create new jobs. Furthermore, through income generation and tax payments by corporate employees and local governments, companies contribute positively to stabilizing the society they belong to.

◆About CEO Kim Young-ho

▶ Graduated from Seoul National University, Department of Business Administration, 1994 ▶ MBA from Duke University, 2011 ▶ Accountant at Samil Accounting Corporation, 1992-1993 ▶ Accountant at Anjin Accounting Corporation, 1993-1994 ▶ Defense Management Accounting Officer, 1994-1997 ▶ Investment Analyst at CKD Venture Capital, 1997-1998 ▶ Accountant at Sandong Accounting Corporation, 1998-2000 ▶ Director at IMM & Partners, 2001-2004 ▶ Managing Director at IMM Investment, 2004-2008 ▶ Since 2008, Senior Vice President and Head of Investment Division at IMM Private Equity (CIO)

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