Harvard Business Review

Turbocharging Asian Turnarounds

著者：Sunny Yi and Chul-Joon Park

First published on 6月 15, 2006
min read


With turnaround skills honed in the West, private equity investors are sweeping underperforming Asian corporations into their portfolios and retooling the management at these firms to boost shareholder value. Last year, PE investors accounted for about 11% of all merger and acquisition activity in Asia, deploying more than $100 billion across the region. In research on PE activity in Asia, conducted with our colleague Bertrand Pointeau, we've identified three principal strategies activist funds are using to strengthen Asian acquisitions. As a case in point, consider how Newbridge Capital, a partnership between private equity luminaries Texas Pacific Group and Blum Capital Partners, rapidly transformed Korea First Bank from a bankrupt industrial creditor into a world-class financial institution. Transform assets. While making capital work hard is a tenet of any top private equity firm, it's not always cost-effective to reshuffle real estate portfolios in Asia's crowded cities. When Newbridge assumed control of Korea First from government receivership in 2000, the bank was saddled with a costly institutional branch network, built with dedicated space for back-office processes. The answer to the turnaround was to establish a retail branch network—typically calling for simpler layouts in high-traffic consumer locations. Rather than divert resources to rebuilding branches from scratch, Newbridge redesigned the existing infrastructure. It consolidated corporate business into a handful of large-scale branches, closed some branches, and then stripped the remaining ones of their back-office functions, focusing them instead on reaching out to consumers through customer sales. The simplification resulted in $50 million of bottom-line improvements within a year and allowed Korea First to shrink its branch network by 31 offices. Parallel process. Activist private equity funds typically establish a program office to develop step-by-step plans to boost their acquisitions to full potential. But in Korea's intensely fast-paced business environment, step-by-step isn't always optimal. In the case of Korea First, Newbridge launched simultaneous initiatives to accelerate the bank's transformation. While frontline managers streamlined branch operations, the new owners assigned a high-level executive team supported by outside technical experts to spearhead a change management program to consolidate loan processing, credit collection, and trade finance into two new customer service centers. Meanwhile, dedicated project teams orchestrated the upgrade of Korea First's information technology organization, adding telemarketing and customer call-center capacities. By executing these changes in parallel, Newbridge was able to make Korea First's new facilities operational within five months. Think HR. As in many Asian business cultures, Korea's labor and management have a loyalty compact supported by strong employment laws. The turmoil of Korea First's bankruptcy and sale left the bank with a demoralized frontline workforce and an imperative to retain employees in the transition. Recognizing this, management tapped key human resource staffers as allies in the change campaign, making them more available to branch-office workers. Management broadcast the bank's commitment to retain employees who were made redundant by downsizing, helping to train those workers for new positions in customer service and sales. In all, branch closings and work-process changes ended up claiming 800 jobs, but these were more than offset by newly created positions that displaced workers could apply for. The candor and support—reinforced by cash incentives for working more efficiently—helped Korea First shift its business quickly to the consumer side and improve its efficiency, cutting loan approval time by 75%. By 2005, five years after Newbridge's acquisition, the bank's new infrastructure was best in class: Not only was it a leader in online banking, but it had overhauled its technology platform; centralized back-office processing, customer service, and risk management; reinforced financial controls; and focused the organization on profitability rather than volume. With one of the industry's lowest ratios of nonperforming loans, its balance sheet was the nation's strongest. The payoff: In January 2005, the British banking group Standard Chartered bought Korea First for $3.25 billion, a nearly fourfold return on the private equity fund's cash investment.

With turnaround skills honed in the West, private equity investors are sweeping underperforming Asian corporations into their portfolios and retooling the management at these firms to boost shareholder value. Last year, PE investors accounted for about 11% of all merger and acquisition activity in Asia, deploying more than $100 billion across the region. In research on PE activity in Asia, conducted with our colleague Bertrand Pointeau, we've identified three principal strategies activist funds are using to strengthen Asian acquisitions. As a case in point, consider how Newbridge Capital, a partnership between private equity luminaries Texas Pacific Group and Blum Capital Partners, rapidly transformed Korea First Bank from a bankrupt industrial creditor into a world-class financial institution.

Transform assets. While making capital work hard is a tenet of any top private equity firm, it's not always cost-effective to reshuffle real estate portfolios in Asia's crowded cities. When Newbridge assumed control of Korea First from government receivership in 2000, the bank was saddled with a costly institutional branch network, built with dedicated space for back-office processes. The answer to the turnaround was to establish a retail branch network—typically calling for simpler layouts in high-traffic consumer locations. Rather than divert resources to rebuilding branches from scratch, Newbridge redesigned the existing infrastructure. It consolidated corporate business into a handful of large-scale branches, closed some branches, and then stripped the remaining ones of their back-office functions, focusing them instead on reaching out to consumers through customer sales. The simplification resulted in $50 million of bottom-line improvements within a year and allowed Korea First to shrink its branch network by 31 offices.

Parallel process. Activist private equity funds typically establish a program office to develop step-by-step plans to boost their acquisitions to full potential. But in Korea's intensely fast-paced business environment, step-by-step isn't always optimal. In the case of Korea First, Newbridge launched simultaneous initiatives to accelerate the bank's transformation. While frontline managers streamlined branch operations, the new owners assigned a high-level executive team supported by outside technical experts to spearhead a change management program to consolidate loan processing, credit collection, and trade finance into two new customer service centers. Meanwhile, dedicated project teams orchestrated the upgrade of Korea First's information technology organization, adding telemarketing and customer call-center capacities. By executing these changes in parallel, Newbridge was able to make Korea First's new facilities operational within five months.

Think HR. As in many Asian business cultures, Korea's labor and management have a loyalty compact supported by strong employment laws. The turmoil of Korea First's bankruptcy and sale left the bank with a demoralized frontline workforce and an imperative to retain employees in the transition. Recognizing this, management tapped key human resource staffers as allies in the change campaign, making them more available to branch-office workers. Management broadcast the bank's commitment to retain employees who were made redundant by downsizing, helping to train those workers for new positions in customer service and sales. In all, branch closings and work-process changes ended up claiming 800 jobs, but these were more than offset by newly created positions that displaced workers could apply for. The candor and support—reinforced by cash incentives for working more efficiently—helped Korea First shift its business quickly to the consumer side and improve its efficiency, cutting loan approval time by 75%.

By 2005, five years after Newbridge's acquisition, the bank's new infrastructure was best in class: Not only was it a leader in online banking, but it had overhauled its technology platform; centralized back-office processing, customer service, and risk management; reinforced financial controls; and focused the organization on profitability rather than volume. With one of the industry's lowest ratios of nonperforming loans, its balance sheet was the nation's strongest. The payoff: In January 2005, the British banking group Standard Chartered bought Korea First for $3.25 billion, a nearly fourfold return on the private equity fund's cash investment.