In an engaging fireside chat, Steve Suk Jung Lim, Chairman and Managing Partner of SJL Partners, shared his insights on the private equity outlook in Korea for 2024 and 2026. Here are the key takeaways from the conversation:

Background and Niche Play: Lim introduced himself as the founding partner of SJL Partners, which he founded in 2017 with his ex-colleagues from CVC Capital and JP Morgan. The firm focuses on cross-border buyout transactions, working closely with strong Korean strategic partners to create sustainable value across regions.

Identifying Strategic Partners: SJL Partners identifies strategic partners through an intense brainstorming session at the end of each year, where they select main investment themes. For 2024, their focus areas include energy, electricity infrastructure, AI-driven semiconductor, healthcare, and robotics and automation.

Red Flags and Due Diligence: Lim highlighted macro risks, political risks, and regulatory uncertainties as red flags for investments. The firm reviews around 40-50 opportunities per year, doing due diligence on 4-5 of them, and eventually closes 1-2 deals.

Post-Mortem Analysis and Monitoring: SJL Partners conduct post-mortem analyses on deals they pass on, monitoring the companies’ progress and revisiting opportunities in 3-4 years if they become more attractive.

Deal Structure and Investor Comfort: The firm’s deal structure typically involves mezzanine financing, with strategic partners holding 51% equity and SJL Partners holding 49%. Investors are comfortable with this structure, which provides downside protection and allows for sustainable growth.

Sustainability and ESG: Lim emphasized the importance of sustainability and ESG considerations in their investment decisions. They incentivize management teams with sustainable targets and KPIs, ensuring that their portfolio companies meet ESG guidelines.

Incentivizing Management Teams: SJL Partners use a Management Incentive Programme (MIP) to incentivize management teams, providing clear guidelines and targets for the next five years. This approach aligns management interests with the firm’s goals and promotes sustainable value creation.

Aspirations and Secondaries: Lim’s aspiration for SJL Partners is to create sustainable value through collaborative partnerships, rather than solely focusing on financial returns. He sees secondaries growing as an important trend, with the firm actively participating in buying deals from other private equity firms.

Key Quotes

• “We want to be a transformative bridge between Korean strategic companies and global buyout targets.”
• “We are not just financially engineered; we want to create sustainable value working with our strategic partners.”
• “We incentivize management teams with sustainable targets and KPIs to ensure our portfolio companies meet ESG guidelines.”

Key timestamps:

00:09: Introduction
00:36: Steve Lim’s Background and SJL Partners
01:15: SJL Partners’ Unique Business Model
04:40: Transition from CVC Capital to SJL Partners
08:03: Identifying and Assessing Strategic Partners
09:06: Investment Themes and Focus Sectors
10:45: Global Presence of Korean Companies
11:07: Challenges with Korean Companies’ M&A
12:55: Criteria for Investment and Red Flags
13:36: Geopolitical and Regulatory Risks
16:25: Supply Chain Disruption and Investment Strategy
17:41: Post Mortem Analysis of Passed Opportunities
19:45: Competition with Other PEs
21:19: Investment Focus on OECD Countries
21:53: Focus on Sustainability and Resilience
23:07: Interest Rate Considerations
24:55: Control and Exit Strategy
26:14: Management Team Incentives
27:20: Aspiration and Mission
28:21: Trends in Secondaries Market
29:30: Conclusion