"Now the competitiveness of a securities firm depends on how efficiently it can use its own capital and funding. In the end, own capital and deal-sourcing capability inevitably become crucial."
Park Sung-joon, vice president of Daishin Securities, said in a recent interview at Daishin Securities' headquarters in Jung-gu, Seoul, that the investment banking (IB) market for securities firms has entered a structural transition. If arranging capabilities such as initial public offerings (IPOs), corporate bonds, and project financing (PF) were core strengths in the past, it is now shifting to an era where investing with proprietary capital, acquisition financing, and structured finance capabilities determine success or failure.
He said the criteria for competition are changing as the size of funds securities firms can manage grows with the introduction of the comprehensive financial investment business operator regime, mega-IBs, short-term notes, and the individually managed account (IMA). He projected that the key strengths will be how much capital a firm can secure and manage efficiently, and how many quality deals it can source through touchpoints with corporations.
Park said this shift is also linked to changes in corporations' funding environments. As the market's view of rights offerings and IPOs becomes stricter, corporations' funding options are narrowing. He said, "If the primary market becomes excessively depressed, corporations will eventually look for alternatives like price return swaps (PRS) or asset securitization," adding, "A balance between the secondary market and the primary market is needed."
He also said the recent debate over overlapping listings could affect not only the IPO market but corporations' overall funding structures. He emphasized that access to capital markets should not be unduly restricted for national strategic industries that require large-scale, long-term investment, such as space, physical AI, and secondary batteries. Park said, "There needs to be a balance between investor protection and raising growth capital for corporations."
Daishin Securities is also pushing for internal reforms to align with these changes. Since being designated a comprehensive financial investment business operator, it has established acquisition financing and syndication teams and is expanding its corporate coverage organization. Park cited entry into the short-term notes business as the next step, saying, "Our goal is to grow into a full-fledged IB house with the capital strength to source good deals and execute them."
The following is a Q&A with Park.
―What do you see as the biggest theme running through the securities firms' IB market this year?
"We see equity-like funding as the biggest issue. It is important for the secondary market to improve, but if you look only at the secondary market and make the primary market overly tight, it becomes difficult for corporations to raise funds. Not only large corporations but also mid-sized KOSDAQ corporations and small and venture businesses need ongoing capital as they grow.
Until now, corporations have raised funds through methods such as subsidiary IPOs and rights offerings. But if market backlash against these tools grows, the cards corporations can play decrease. Corporate bonds are not a tool that can be issued without limit either. Interest burdens must also be considered. In the end, I believe the capital market needs balance between the secondary market and the primary market."
―There is also an assessment that the role of IBs has changed significantly compared with the past.
"Institutionally, it has become a structure that has no choice but to move in that direction. With comprehensive financial investment business operators, mega-IBs, short-term notes, and IMAs, the size of funds that securities firms can manage is continuously growing. In the past, arranging mandates accounted for a larger share, but now investment capabilities using proprietary capital are becoming more important. Investment-type businesses such as private investments, LP commitments, and acquisition financing will inevitably grow.
Ultimately, a securities firm's competitiveness depends on how efficiently it uses its own capital and funding. What matters is not a particular product, but the ability to source deals and assets suited to market conditions and allocate capital efficiently."
―In an IB market shifting "from arranging to investing," where is the tipping point?
"In the end, it is proprietary capital and deal-sourcing capability. As the book grows, the size of transactions you can participate in changes. From a corporation's perspective, when there is a large funding need, it will first look for a securities firm with capital strength. But not everything is decided by capital scale alone. One securities firm cannot take all the exposure. Large corporations also do not try to rely on only one securities firm.
Ultimately, what matters is how well you source good deals and build relationships with corporations. Competitiveness emerges when large capital combines with strong deal-sourcing capability."
―What preparations is Daishin Securities making after being designated a comprehensive financial investment business operator?
"After registering as a comprehensive financial investment business operator, we set up mergers and acquisitions (M&A) and acquisition financing teams and also created a syndication team. As the book grows, sell-down capabilities to institutional investors also become important. We are also expanding our coverage staff. In corporate finance, relationships with corporations are ultimately important. That is why we are putting a lot of effort into strengthening our coverage organization. If we move toward a mega-IB system, coverage and deal-sourcing capabilities will become even more important."
―You cited entry into the short-term notes business as the next step.
"Short-term notes do not simply mean launching a new business. It means the book we can manage grows as we are able to raise external client funds. When the book grows, we can access transactions of a size that was difficult to participate in before. Corporations can also receive a wider array of financial solutions. In the end, I see short-term notes as a tool that expands the range of financial services we can offer to corporations."
―What is the strength of Daishin Securities as an independent securities firm?
"Decision-making speed. Securities firms affiliated with financial holding companies or large corporations often have to go through multiple decision-making steps. Daishin Securities can judge and act relatively quickly. One reason the share of securities firms has grown in the acquisition financing market compared with the past is decision-making speed. As market conditions change quickly, swift responses are important.
At the same time, Daishin Securities also has a risk management culture built over many years. The combination of fast decision-making and prudent risk management is our strength."
―How do you view the debate over overlapping listings on the ground?
"I agree with the intent. Listing after a physical split merely to increase the number of listed companies, while damaging the parent company's shareholder value, can clearly be problematic. But I think it is risky to uniformly block all overlapping listings. Each corporation's situation is different, and each industry requires different amounts of capital. Korea has encouraged a holding company structure over the years. But if we uniformly block listings when subsidiaries try to raise growth capital, other problems may arise."
―Are there industries that should be treated as exceptions?
"Industries that require massive funding over long periods, such as space, physical AI, and secondary batteries, should be viewed differently. These industries may require investments on the order of tens of trillions of won. It is not easy for a parent company to keep investing solely with its own funds. Ultimately, we need to open a path for growth by raising external capital through the capital markets. We should block problematic transactions, but we should not block the raising of growth capital for new industries."
―Is the recent use of structured finance like PRS by corporations along the same lines?
"Yes. If subsidiary IPOs are difficult, rights offerings are burdensome, and there are limits to issuing corporate bonds, corporations have no choice but to move toward utilizing the assets they hold. The recent increase in PRS can be seen as an extension of that trend. But PRS is not a cure-all. It is a structure that can work when the stock market is strong, but if the market wobbles, the burden can grow. If stock prices fall, repayment pressure can arise.
Ultimately, the key is that there must be a variety of funding tools corporations can use depending on market conditions. The role of IBs is to present appropriate solutions in such situations."
―Could overlapping listing regulations affect the M&A market as well?
"They could. If subsidiary IPOs become more difficult, corporations will consider selection and concentration. If listing is hard, they may have to merge, sell, or restructure. For corporations in which financial investors (FIs) have invested, concerns may deepen due to exit issues. In that regard, I think carve-out transactions or moves to reorganize business portfolios may increase going forward. As overlapping listing guidelines are fleshed out, corporations' strategies may also change bit by bit."
―Which industry groups are you watching recently?
"We have a positive view on physical AI. We believe demand for automation and robots in manufacturing sites will inevitably grow. Robots include batteries and AI chips. Ultimately, multiple industries related to physical AI may grow together. We are also watching the space industry. Even if these industries do not have large sales right away, they can form big markets in the long term. As related technology and talent exist domestically, startups and investment can follow."
―What is the next step for Daishin Securities' IB?
"I think building a sustainable organization matters more than the league table ranking itself. In the past, our presence in IPOs was not large, but by steadily building capabilities, we have now established ourselves as a top-tier house. As IPOs grew, we also created a virtuous cycle with ECM, mezzanine, and rights offerings.
Going forward, our goal is to build the same virtuous cycle in coverage and acquisition financing. After short-term notes, we want to grow into a house that can provide corporations with more diverse solutions based on a larger book."