Dealmaker Weijian Shan on Private Equity in Asia and His Historic Bank Takeover
Private equity may play a crucial role in shaping Asian economies now, but that wasn’t always the case said PAG CEO and chairman Weijian Shan during an event at The Foreign Correspondents’ Club of Hong Kong. He described private equity in Asia as being in its infancy in 1999, when he served as the chief architect of a deal which saw American firm Newbridge Capital take control of Korea First Bank in the aftermath of the Asian financial crisis.
That historic deal is the subject of Shan’s new book Money Games: The Inside Story of How American Dealmakers Saved Korea’s Most Iconic Bank, which the author described as the only book he’s aware of that covers a major private equity deal from start to finish, including its aftermath. Negotiating the takeover of the government-owned bank was no easy task, Shan explained, as Newbridge wanted the government to be responsible for potentially bad loans on the books, while public officials wanted the new investors to assume all the risk. At the same time, the Korean economy was reeling from the financial crisis and subsequent International Monetary Fund bailout.
Having witnessed the ups and downs of the Asian financial crisis, Shan noted how that experience had a direct effect on financial institutions across the region being better suited to weather the 2008 global financial crisis. Similarly, he said, American and European firms are handling the current pandemic-related downturn well because of the lessons they learned in the last crisis.
More than two decades after the Korea First Bank takeover, Shan explained that the private equity market in Asia has matured as capital flows continue to increase and a greater number of firms compete in the buyout, growth capital and venture capital sectors. He also spoke of investors who are desperately seeking new money-making opportunities, and added a word of caution. “I really don’t think private equity is for retail investors,” sad Shan. “It’s by and large a high-risk business.”
This wasn’t Shan’s first time appearing at the FCC; he previously spoke about his book Out of the Gobi: My Story of China and America. With a forward written by Janet Yellin, who is President-elect Joe Biden’s pick for Treasury Secretary, the memoir is a fascinating account of how Shan survived China’s Cultural Revolution and went on to become a professor at the Wharton School of the University of Pennsylvania before embarking on a career in finance.
Watch the full event below: