Invest KOREA

Chapter 1: Footprints in Korea

Corstone Asia’s Korea operation serves as the heart of the company’s regional business

Michael Helmicki, CEO of Corstone Asia, uses a very physical, almost anthropological vocabulary to talk about investing in Korea.

Footprint: In 2008, U.S. private equity (PE) firm Corstone Capital looked at opportunities in “the Korea footprint” (translation: the Korean market).

Ecosystem: The company discovered a great “ecosystem” for growth in Korea through the availability of financial capital from Korean institutional limited partners (LP), opportunities in growth equity and small cap buy-outs, Korea’s commitment to investment in infrastructure, education and R&D and more.

“Establishing an office in Korea made strategic sense for us relative to China and other jurisdictions we had considered along the way,” Helmicki said.

Space: Corstone Asia has closed five funds in Korea, the first of which was in the communications infrastructure “space” (sector) in 2011.

Centerpiece: The company is located in Seoul’s Jung-gu area because Korea serves as the “centerpiece” of Corstone Capital’s Asia strategy.

Fittingly, Helmicki takes a literary approach to describe Corstone Asia’s journey.

“As I often tell my team, we’re in the first chapter of what will be a very long book in Korea,” he said.

Established in 2009 as a leading independent general partner (GP) with sponsorship from global investment firm Corstone Capital, Corstone Asia specializes in growth capital and small cap buy-out, with a typical initial investment ranging from 11 to 20 billion won ($9.8-$17.9 million). The company manages about 100 billion won in five single purpose fund vehicles with six underlying investments, including one small cap buy-out and five growth equity financings in technology, manufacturing and consumer businesses. It expects this year to close two new funds and exceed 150 billion won in assets under management.

Corstone Asia’s investment “spaces” include everything from auto parts to fashion.

“While we are open to investing across a range of industry sectors, we maintain a high level of investment selectivity,” Helmicki said.

Corstone Asia’s mandate is to combine local market knowledge with global capability to help Korean management teams build category-leading companies. Post-investment, the company strives to have a material influence on the “value-up equation” by working closely with investee companies as a significant minority shareholder.

Their approach is to think comprehensively but act incrementally. Helmicki and his six-person team see themselves as in a partnership with their entrepreneurs, maintaining a balance between spending time with their companies and looking for new opportunities, especially among sectors including parts and materials, communications, display and automotive.

“We’re not passive investors who simply put money into a company and wait for good things to happen three years later,” Helmicki said.

Though early in the life cycle of its investments, Corstone Asia is quite “bullish” on the value its investee companies have built post-investment. The company plans to begin harvesting some of their early Korea investments in the next three years and to re-cycle gains into new opportunities with Korean companies.

Corstone Asia also aims to attract international LP capital to “marry” it - there’s another Helmicki-esque turn of phrase - with domestic institutional capital to gain scale. The CEO’s goal is to raise a larger blind fund focused on growth equity and small cap buy-out with participation from Korean and international LPs.

“The challenge for us now is taking the Corstone Asia story and the Korean PE story to foreign limited partners who are generally not educated on the Korean marketplace. We believe that we are in the early stages of bending the learning curve for them,”Helmicki said. “While China and India will continue to get large aggregate PE allocations, we believe there is a place in every portfolio for exposure to Korean GPs.”