Kwanhoon Lee, one of the founding fathers of Praxis Capital Partners, dreamed of being a composer, and kept this ambition alive as a musician even after he started his career at Hyundai Merchant Marine (HMM), working with his colleagues at night.

Uncertain about the future after the 1997 financial crisis, and having sold 20 ships in three years, Lee quit this job and moved to SM Entertainment, which was founded in 1995 as the first company to introduce systemic casting, training, producing and a management system. He went there with the songs he wrote to achieve his dream.

However, Lee resigned from SM Entertainment about six months later as the volatile music market became more uncertain. He took charge of planning strategies for content distribution and an initial public offering at SBS Contents Hub, which created a paid model for online content. But Lee was still unsure whether he was on the right path, and decided to get a master’s degree in business administration (MBA).

“I decided to move to the investment industry due to an increased understanding of PE (private equity) after I had encountered it indirectly,” he said, adding, “I decided to go for an MBA to improve my knowledge and refine my technique.”

After two years of knocking on the doors of overseas colleges, Lee began his MBA at the University of Michigan in 2005. He went through numerous challenges until he found the way to pass, but these became a blessing in disguise. Unlike investment banks, which prefer financial specialists, consulting firms offer opportunities to those with more diverse experiences. After graduating with the MBA, Lee began an internship at Bain & Company and began his first activities in the investment industry.

The “big deal” he experienced at Bain & Company was his start as an investor. Lee helped Affinity Equity Partners and KKR to acquire Oriental Brewery Company in one of the biggest deals in the South Korean capital market in 2009. Hite was the beer market leader at the time, but Bain & Company found that Oriental had a good chance of taking the top spot, based on the growth of beer consumption in Seoul.

Lee then worked in three PE firms. The first was IMM Investment, where he helped form a blind fund and invested in companies ranging from J-micron, a specialist in surface treatment to Wonbang Tech, an industrial equipment manufacturer. He later moved to SBI Investment Korea and KAMUR Partners.

Praxis Capital Partners: improving growth potential and corporate value

In 2013, Lee established Praxis Capital Partners with two other chief executive officers, Minsang La and Joonsik Yoon, and it became a gathering of people who used to work at Bain & Company. An independent PE house, Praxis exited from most of its initial investments, including Kolmar Korea, Ubins, and CS Elsolar, and so far has formed seven funds and invested in a total of 16 projects.

“Praxis Capital’s employees always set up strategies before investment,” Lee said. “Considering the domestic and overseas situation, we set and implement goals for the next three to five years, which makes a difference.”

Lee’s experience of working in various industries has influenced his investment philosophy. After watching investments by private equity fund (PEF) operators at Bain & Company, Lee felt that it was important to clearly understand the advantages and limitations of financial investors. At the same time, he set a standard of proceeding with an investment when it was clearly possible to improve corporate value through management participation and investment. He followed his own rules with mergers and takeovers in various industries after actually becoming a PEF manager.

“When we were working on a project to improve the operational performance of the sales and marketing departments of food distribution companies, we drew a roadmap to reduce costs by more than five billion won a year,” Lee said. “We can identify the possibility of improving the corporate value of small and medium-sized companies through analysis, such as predicting market changes due to supply and demand.”

His investment philosophy is also reflected in Praxis Capital’s post-merger integration work. The firm works under a Triple 3 Program: decide three key tasks, work on them for three years, and increase the value of the target company threefold.

Industry Talks: Leader in the blind fund establishment

In December 2019, Praxis Capital Partners successfully finished the establishment of a blind fund worth 500 billion won. The target had been a fund worth 400 billion won, but the amount was increased after big South Korean institutions such as the National Pension Service (NPS) and Korea Post committed money.

It was substantially bigger than the first blind fund from 2015, which was worth 106 billion won. Lee’s network with South Korean limited partners is thought to be one of the main reasons for this success. (Reporting by Ar-rum Rho)