Carlyle CEO Lee’s sudden exit puts the PE’s Korea strategy in spotlight

The sudden resignation of The Carlyle Group Inc. Chief Executive Kewsong Lee has not just surprised the global investment community but raised questions over the US private equity giant’s strategy for South Korea.

Carlyle said on Monday that Lee, 56, is stepping down with immediate effect months before the scheduled end of his five-year contract.

He also resigns from his post on Carlyle’s board of directors but will be available until he leaves the company at the end of 2022.

A US citizen of Korean descent, Lee took the helm of the PE giant as co-CEO in 2018 and became the sole boss in September 2020 after a power tussle that led to the departure of co-Chief Executive Glenn Youngkin.

Carlyle’s co-founder Bill Conway, current non-executive co-chairman, will step in as interim CEO during the search for a successor, the company said in a statement.

Lee joined Carlyle in 2013 as deputy chief investment officer for corporate private equity and worked as head of the global credit segment. Previously, he worked at Warburg Pincus for 21 years.

CARLYLE’S KOREA STRATEGY

Lee’s abrupt departure has many investors wondering if it will bring a change in the private equity company’s investment strategy on Korea.

Carlyle wasn’t an active player in the Korean M&A market until Lee took the helm of the investment company. Before that, the few prominent Korean companies in its investment portfolio included Yakjin Trading Corp acquired in 2013. and SK Shieldus Co., formerly known as ADT Caps Co., in 2014.

With Lee at the top, however, Carlyle has aggressively expanded its footprint in Korea on its own or by teaming up with domestic financial services firms.

Industry watchers said it’s partly because the 56-year-old was more familiar with the Korean culture and systems than other global funds leaders since he spent his early years in Korea with his parents.

His late father Hak-jong Lee once served as dean of Yonsei University's college of business administration in Seoul.

As soon as Kewsong Lee ascended to the company’s top post, he hired Kim Jong-yoon, who took charge of M&A activities at Goldman Sachs in Asia, as Carlyle’s Korean chief.

In 2020, Carlyle invested in KB Financial Group and formed a strategic alliance with the company to collaborate on new investment opportunities both in Korea and overseas. Carlyle also established a strategic partnership with Korean Re, the country's top reinsurer, to explore co-insurance opportunities.

The Carlyle Group, through Carlyle Asia Partners V, last November bought Korea's second-largest coffeehouse chain A Twosome Place from Anchor Equity Partners for about 1 trillion won ($842 million).

The PE giant also poured $200 million into Kakao Mobility Corp. in February of last year in a pre-IPO investment.

Most recently, Carlyle bought a 10% stake in Hyundai Glovis Co. from Hyundai Motor Chairman Chung Euisun and his father and Honorary Chairman Chung Mong-koo for about 611 billion won in January of this year, becoming the third-largest shareholder of the unit.

With $376 billion of assets under management as of June 30, 2022, Carlyle deploys capital across four business segments: corporate private equity, tangible assets, global credit and investment solutions.

In an interview with The Korea Economic Daily in September 2018, Lee said that Carlyle saw the private debt market as an area with huge growth potential for the firm, adding that its board and top management presented the expansion of the credit business as a top priority.

RUFFLED FEATHERS 

According to foreign media outlets, Lee and Carlyle’s board directors clashed over his contract in recent discussions.

In his aggressive attempts to remake the firm, Lee made changes that at times put him at odds with the old guard, according to a Bloomberg report. He tried to knit together competing factions and restructure teams to make dealmakers work more closely together. He also staffed the top ranks with new faces and tried to shift the Washington-based firm’s power center toward New York, according to Bloomberg.

The Wall Street Journal reported that Lee's ascension to the top post and strategic shift ruffled some feathers at the firm. A handful of senior investment professionals left amid the changes.

Write to Jun-Ho Cha at chacha@hankyung.com
In-Soo Nam edited this article.