Abstract
Abstract As any good investor knows, the commonly used adage “buy when there is blood in the streets” applies not only to literal times of bloodletting but also to metaphorical ones. It is best to buy cheap assets in the wake of some crisis. With this in mind, in August 2003 the Dallas-based private equity firm Lone Star Funds believed it had found an unusually promising investment deal in South Korea. The country’s macroeconomic conditions were sound, but twin economic shocks—the 1997 Asian financial crisis and a 2002 credit card crisis— had inflicted heavy damage on local businesses in the financial and industrial sectors. Overwhelmed by bad debt, thousands of Korean firms faced insolvency. Lone Star determined that the Korea Exchange Bank (KEB), the country’s only foreign exchange bank, provided a great opportunity to enter the Korean financial market.
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