US private equity giant TPG has named Lee Sanghoon as a partner and head of South Korea as the firm plots its return to the country's competitive buyout market.

The former Samsung executive and head of Korea at Morgan Stanley's PE unit, has not officially started yet and will be based in Hong Kong. He will report to Tim Dattels, managing partner of TPG Capital Asia.

“We see Korea, in particular, as a country poised for growth with untapped opportunities across multiple industries,” said Dattels.

TPG has recently made tentative steps to return to Korea, from which it withdrew in 2007 after its spectacular success sourcing deals in the 1990s. The firm hired Lee Seung-June from Goldman Sachs in 2014 as a principal to work on Korean deals out of Hong Kong. 

Recruiting Lee Sanghoon – the eldest son of Lee Hak-soo, former right-hand man of Samsung chairman Lee Kun-hee and a successful investor in his own right – signals TPG’s serious intent to aquire assets in Korea. He has not established a track record in exiting investments as yet, but the deals he has been involved in are largely performing well, said industry sources. 

Korea, with its mature companies and deep and liquid financing market, has seen some of the largest buyouts in Asia of late. Rival US PE group Carlyle agreed to acquire security company ADT Korea for $1.93 billion in 2014.

TPG did bid for Tesco’s Korean retail chain Homeplus in a consortium with local snackmaker Orion, but dropped out in the early stages of the bidding process. The highly-contested auction was eventually won last year by local firm MBK Partners in the Asia-Pacific region's biggest ever buyout, at $6.4 billion.

Funds have amassed serious firepower in recent years but have struggled to put the money to work in the region. TPG finished raising $3.3 billion for its sixth Asia fund in 2014. 

Too much too young

TPG chalked up a spectacular success in South Korea market with its investment in nationalised Korea First Bank (KFB), which it cleaned up after the 1997 Asian financial crisis.

The PE firm acquired roughly half of KFB in 1999 for W500 billion ($442 million) and then more then doubled its money when it sold the bank to Standard Chartered in 2005. TPG’s joint venture with Blum Capital, called Newbridge Capital, was responsible for the deal.

Newbridge also bought Hanaro Telecom in 2003, beating powerful chaebol LG to the deal.

TPG shuttered its Korea office not long after the 2005 sale of KFB amid a backlash against the new wave of foreign funds making money on bailed-out state assets. Financial engineering by funds seemed a far more alien concept than it did in the US, where buyout firms had been operating for some years.

Since leaving Korea, TPG has cooperated with a local buyout fund called Vogo Investment Group to keep an eye on developments in the country. Vogo’s managing partner, Park Byung-Moo, was Korea country head at TPG Newbridge Capital. Korea’s National Pension Service invested $300 million in one of TPG’s funds.

The man behind the deals

Lee Sanghoon had been with Morgan Stanley’s Asia private equity group since 2010, most recently as managing director and head of Korea. The firm's Asia-Pacific Private Equity Strategy invests primarily in highly structured minority investments and control buyouts in growth-oriented companies. 

The firm closed its fourth fund in 2014 at $1.7 billion. MSPE Asia's return on money invested from Korean investments prior to fund four was about 2.8 times, according to industry sources.  

A spokesperson for Morgan Stanley confirmed that Lee would be leaving the firm and that new leadership for its Korea PE business would be announced shortly, in the form of an internal appointment.   

Morgan Stanley's private equity division has around 10 investing professionals based in Seoul, including two remaining managing directors, according to people familiar with the operation. Korea has been a significant market for the firm, representing around 30% of its PE investing across Asia.

Lee had first worked at Samsung C&T in 1998 after graduating from Korea University. He then took time out to earn an MBA from MIT Sloan School of Management and returned to Korea in 2001 to work for Samsung Life.

He spent six years with Samsung Group in Korea and then joined Merrill Lynch to become head of M&A and capital market transactions in Korea, before his move to Morgan Stanley.