Artificial intelligence (AI) cuts across every private equity investment decision as disruption and enablement scenarios are factored into underwriting. IT services is arguably among the most impacted industries, but Chung Ho Park, a partner and head of Korea at KKR, is reluctant to contextualise his firm’s recent commitment to Samsung SDS solely as a response to this trend.

Rather, it is about a subsidiary heavily reliant on revenues from sister companies becoming more diversified by adding third-party customers. It is about deploying KRW 6.4trn (USD 4.3bn) in balance sheet cash – that has more than doubled in size over the past 10 years and now accounts for nearly half of total assets – to enhance a share price that has been relatively flat over the same period.

“They decided a decade ago to focus on Samsung, and this made sense, it helped them get where they are today. But ultimately, they realised they had become too insular,” Park explained.

“There’s a lot of technology out there and they can be an important conduit in terms of identifying opportunities to be applied more broadly in the group. There are strategic acquisitions they can pursue or partnerships they can make to give them access to that technology.”

KKR has agreed to subscribe to KRW 1.22trn in convertible bonds issued by Samsung SDS, primarily drawing on capital from its fourth pan-Asian fund. The bonds have a fixed conversion price of KRW 180,000 per share, which represents an 18.8% premium to the April 14 closing price, and a maturity of five years. Should KKR opt to convert, it would hold an approximately 8% stake in Samsung SDS.

Park acknowledges the risks of participating as a minority investor in the listed subsidiary of a conglomerate – two other Samsung entities and Jae-yong Lee, chairman of Samsung Group, together own nearly 50% – but believes the parties have long-term alignment. “There are all kinds of ways we could have done it, but we thought simple was better,” he said of the deal structure.

That alignment is based in part on an ongoing dialogue with Samsung regarding the group’s strategic priorities and ways in which it could work with KKR. The investment firm engages with other Korean conglomerates in a similar fashion.

Focal points

Samsung SDS was mentioned in these discussions, but the company didn’t emerge as a solid investment target until Samsung broached the subject, saying it would welcome ideas on value creation. At no point was the business positioned as a potential divestment, which Park sees as typical of a Korean market in which family groups are reluctant to sell anything that isn’t considered irrelevant or perhaps low quality.

“You have core businesses and less core businesses. These may not be sold, but there are opportunities for value creation,” he added. “While they prioritise some of their real core businesses, they might want a partner to help them with assets that are less core.”

KKR previously did this with HD Hyundai Marine Solution, the aftersales marine services arm of Hyundai Heavy Industries Holdings, acquiring a 38% stake at a valuation of approximately KRW 2trn in 2021. The company listed in 2024 and now has a market capitalisation of KRW 8.8trn. Park noted that he has fielded regular enquiries from other groups about how and why this partnership evolved.

KKR will work with Samsung SDS on organic and inorganic growth strategies intended to accelerate the company’s expansion as a full-stake AI solutions provider. Last year, IT services revenue amounted to KRW 6.5trn, comprising cloud – on-demand services such as storage and applications, infrastructure management, and software-as-a-service (SaaS) – systems integration, and IT outsourcing.

Another KRW 7.4trn came from logistics services, which focuses on IT-enabled supply chain management. Though larger in revenue terms, it is less lucrative. Overall operating profit reached KRW 957bn in 2025. IT services contributed KRW 827bn with a margin of 12.6%, compared to KRW 130bn and 1.8% for logistics services.

The cloud service provider (CSP) and managed service provider (MSP) segments, which cover on-demand services and infrastructure management, both enable AI adoption, according to Park. He also expects Samsung SDS to build more AI functionality into its customised service offerings. M&A and partnerships can play a role in this as the company looks beyond its internal development capabilities.

Samsung SDS built enterprise systems used by the likes of Samsung Electronics and Samsung C&T Corporation, and ships products for its parent globally. Over 75% of revenue is generated from within the Samsung ecosystem. KKR wants to help create more of an outward-looking perspective, in part to ensure the company remains relevant in a fast-changing global technology landscape.

Other initiatives will contribute to this commercial reorientation. These may include altering compensation policies – a bonus scheme that rewards everyone based on overall performance could be replaced by one aligned to individual objectives – and ensuring greater stability and consistency in management.

“We need a long-term strategy, we need to be intentional as to where we are going to invest over what period, we need to communicate that to the investor community, and we need to deliver on it,” Park added.

Alignment of interests

Much of what KKR and Samsung SDS have agreed to focus on corresponds to targets set out by the company under the Corporate Value-Up Program, which was introduced by the government in 2024 to boost stock prices. The goal is to eliminate the “Korea discount” phenomenon whereby listed companies trade below global peers because of perceived governance weaknesses and low shareholder returns.

While some PE investors hope Value-Up will trigger more take-private opportunities in the same vein as Japan, Park observes that is not the only means of achieving the programme’s objectives. The Samsung SDS deal could be indicative of another route whereby better alignment of interest between interested parties – from majority and minority shareholder to employees – leads to value accretion.

“It’s Samsung’s first partnership of this kind and our first partnership with Samsung. We are both committed to its success, which could be impactful in terms of how people think about working with private equity,” he said.