MBK and Korea Zinc Incident Extension... Financial Supervisory Service Holds Meeting with Private Equity Fund CEOs

Deputy Governor Ham Yong-il of FSC Hosts
Discussion on 'Industrial Domination by Financial Capital'
MBK Partners Also Attend

Ham Yong-il, Deputy Director of the Capital Markets Department at the Financial Supervisory Service. Photo by Dongju Yoon doso7@

The Financial Supervisory Service (FSS) met with CEOs of major private equity fund (PEF) management firms to discuss the impact of financial industry corporate governance. This meeting is seen as a follow-up to FSS Chairman Lee Bok-hyun’s concerns raised at the end of last month regarding financial capital’s industrial control in relation to MBK Partners’ acquisition of Korea Zinc.

On the morning of the 12th, Ham Yong-il, Deputy Governor of the FSS, stated at the PEF CEOs meeting, "It is meaningful to discuss the roles and responsibilities of PEFs from the perspective of 'industrial control by financial capital such as private equity funds,' which differs from the traditional discussions on the separation of banking and industry."

Attendees at the meeting included MBK Partners, H&Q, Hahn & Company, Stick Investment, IMM PE, SKS PE, VIG Partners, UCK Partners, Skylake, Stonebridge Capital, JKL Partners, and KCGI.

Deputy Governor Ham explained, "Since the PEF system was introduced domestically in 2004, the committed capital has grown dramatically to around 140 trillion won. In particular, PEFs have established themselves as key players in the domestic mergers and acquisitions (M&A) market, focusing on corporate restructuring and supplying venture capital."

He added, "In this process, PEFs have contributed significantly to the development of the capital market and financial industry by raising interest in shareholder rights and striving to improve corporate governance."

However, he noted that with the growth of the PEF industry, new discussions on the roles and responsibilities of the financial industry need to begin.

Deputy Governor Ham said, "There are concerns that PEFs, which aim for short-term profit generation, might inadvertently undermine the long-term growth engines of companies. There is also a perspective that PEFs, managing large amounts of third-party funds in regulatory blind spots, could have a considerable impact on the market."

He further mentioned, "Recently, some PEFs’ involvement in management control disputes and conflicts of interest with minority shareholders have also drawn attention." This is interpreted as a reference to the recent management control dispute involving Korea Zinc.

Deputy Governor Ham stated, "The fundamental premise that PEFs should operate based on autonomy and creativity according to market principles remains unchanged. However, the issue of industrial control by financial capital is a topic we hope to continue discussing productively with the authorities from a long-term perspective."

Meanwhile, on the 28th of last month, FSS Chairman Lee Bok-hyun held a briefing at the Bankers’ Hall in Myeong-dong, Seoul, regarding MBK Partners, the private equity fund supporting Youngpoong. He said, "In the past, such acquisitions did not raise issues because of the separation of banking and industry. Now, we believe we need to consider the side effects caused by financial capital’s control over industrial capital."

Chairman Lee also stated, "When financial capital, which typically needs to exit the business within 5 to 10 years, controls our industrial capital, there is a concern that, for example, the overall business scale might not be maintained, or major business units might be sold off without consideration, potentially harming shareholder value from a mid- to long-term perspective. We need to make this a key issue for further consideration."

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