Samsung Securities undergoes reorganization to strengthen investment banking

Samsung Securities Co. headquarters [Courtesy of Samsung Securities]

Samsung Securities Co., the financial services arm of South Korea’s Samsung Group, has been reorganizing the investment banking (IB) business so that it is capable of providing customers various financial solutions all at once, according to the head of its IB business.

“We will diversify our revenue streams by expanding principal investments (PI) and strengthen synergy across the entire organization to establish a stable revenue base that are not unsettled by economic ups and downs,” said Lee Jay-hyun, vice president and head of IB business at Samsung Securities, during a recent interview with Maeil Business Newspaper.

Since assuming his position in September last year, Lee has been introducing new initiatives as head of the first investment banking (IB1) division that is responsible for traditional IB work such as merger and acquisitions and initial public offerings.

Late last year, Samsung Securities expanded its IB1 division to five departments from the previous three. A new division to support cross-departmental cooperation has been newly added, and the PI business was moved under the umbrella of the IB1 division.

The key behind the reorganization was to entrust all members to engage in coverage, instead of having dedicated personnel. “Coverage” refers to sales activities toward businesses by identifying and sourcing their various financial needs. Most of the major brokerage houses place a dedicated team or unit to handle coverage.

Traditionally, an M&A staff member, for example, would identify the need for a potential IPO or a bond issuance through the course of their regular duties, and tell that to the coverage unit or team.

“When there’s a dedicated coverage unit or person, most staff naturally think it’s not their job,” Lee said. “We’ve eliminated a dedicated unit for coverage, so that all staff consider coverage as part of their duties.”

Lee Jay-hyun, vice president and head of IB business at Samsung Securities [Photo by MK DB]

Lee, in particular, expected contributions from the new PI division in changing investment directions at Samsung Securities. His goal is to create a more stable business structure through synergy between PI and IB. Before joining Samsung Securities, Lee was head of the Korea office of the Goldman Sachs Principal Investment Area. There, Lee oversaw a series of successful investment decisions. Many of the companies he invested in, such as Woowa Brothers Corp. and Zigbang Co., have now gone on to become “unicorns.”

“In the past, PI at Samsung Securities was mostly focused on being a limited partner,” Lee said. “Now, we will strengthen our role as a general partner, and make investment decisions on our own, and provide support to increase the value of a company.”

Lee added that through long-term investments, the company will reduce volatility and develop a stable business model.

“We will further link other services, like M&A and IPO advice, at each stage of the company’s growth,” he said.

During the interview, Lee also commented on Samsung Securities’ advisory service in the tender offer by Hybe Co. as part of the recent management battle at SM Entertainment Co.

“The decision to suspend the tender offer was made in consideration of Hybe’s shareholders and our client was satisfied with the decision,” said Lee. “Since offering advice to Hybe, we have received more inquiries from companies seeking advice on how to respond to activist funds,” he added.

One of Samsung Securities’ latest challenges was advising the sale of Korea’s largest flag carrier container shipping line, HMM Co., whose market capitalization is nearly 10 trillion won ($7.6 billion). The sale process has recently gotten into full swing.

“The appointment of our firm as an advisor to HMM is a good example of our capabilities,” Lee said. “We will focus on leading the sale successfully by adjusting the interests of shareholders and highlighting the company’s strengths and weaknesses.”