Book SummaryMoney Games, by Weijian Shan

1-Page Summary1-Page Book Summary of Money Games

The Asian Financial Crisis brought about considerable changes to Korea's economic and financial environment.

In this part, Shan sets the stage by detailing the substantial upheaval in Korea's economic equilibrium and its financial entities caused by the Asian Financial Crisis. He characterizes the turmoil as exposing critical weaknesses, particularly the over-leveraging of companies and financial entities, prompting the need for governmental support through rescue financing and the initiation of reforms that included making the formerly strictly controlled banking industry conform to global standards.

The roots and substantial impacts of the turmoil in South Korea.

Shan clarifies that the true roots of the crisis were concealed by Korea's apparently strong economic expansion. The onset of the crisis exposed the excessive reliance on loans by privileged companies and their financial institutions, a situation previously obscured by assumed government assurances that masked the inherent dangers.

The value of the Korean currency and the stock market both saw a considerable decline.

The story describes the significant decline in South Korea's financial growth after the crisis. In 1997, the Korean currency experienced a significant devaluation, dropping by 65.9 percent against the U.S. dollar, and this downward trend continued into 1998. In 1998, South Korea's economy contracted, experiencing a 7.8 percent decline, while its stock market value also fell dramatically, nearly halving. The economic downturn led to substantial monetary hardships for many individuals in Korea.

Korean companies had accrued substantial financial obligations and overstretched their monetary commitments.

Shan emphasizes that the nation's impressive economic success stemmed from state-directed efforts in tandem with the expansion of export-oriented conglomerates, which relied heavily on securing funds from domestic and foreign banking institutions. The reliance on borrowed capital resulted in perilously high levels of leverage, which intensified when banks chose to prolong existing loans rather than assess their sustainability over time. Shan highlighted that Korean companies typically operated with liabilities that were triple the amount of their shareholder equity, resulting in a proportion of debt to equity of 3 to 1. The circumstances highlighted the potential for a widespread financial collapse among these major Korean corporations, which were grappling with a shocking ratio of debt to equity at five times their capital.

The necessity for the government to secure a financial rescue package worth $58 billion from the International Monetary Fund.

Global investors withdrew their funds, precipitating a severe liquidity crisis in Korea. The economic difficulties faced by the country's leading conglomerates had a significant impact on the banking industry, prompting government action as the ultimate guarantor and exhausting its reserves in managing obligations abroad. In December 1997, when the circumstances could no longer be maintained, the nation sought assistance, culminating in...

Money Games Summary Newbridge Capital's successful revitalization and takeover of Korea First Bank, often referred to as KFB.

Shan recounts how his company's foray into South Korea's financial landscape was ignited by promotional content from Morgan Stanley. He details the team's adeptness, the hurdles arising from a rival bid put forth by HSBC, and the comprehensive negotiations that led to the final terms of the agreement.

Newbridge's pursuit to secure a stake in KFB sparked a subsequent competition among interested parties.

Shan narrates the story of Newbridge's decision to engage, a choice shaped by his associate's past experiences with distressed American banks, among them dealings with David Bonderman. Shan highlights that at the outset, Newbridge was not the preferred bidder since Morgan Stanley was in pursuit of a major international bank to take over the operations of Korea First Bank. Shan describes the fierce bidding war to take over Korea First Bank, highlighting that if HSBC had succeeded, the Korean government would not have maintained a substantial share in the bank's ownership.

Newbridge possessed a wealth of expertise in revitalizing financial institutions facing difficulties.

Shan highlights the skill of Newbridge's leadership in revitalizing struggling financial...

Money Games Summary Private funding in the form of equity is crucial for revitalizing and restructuring businesses facing challenges.

The author emphasizes the unique strategy adopted by investment firms that focus on private holdings, which prioritize nurturing their investments to create lasting value, unlike the practices of publicly traded companies. Shan demonstrates how investors can revitalize underperforming companies and also delves into the challenges faced by private investment firms in environments where politics play a significant role.

Managerial expertise is paired with a commitment to long-term investment in the realm of private equity.

Shan underscores the substantial increase in a company's worth that results from the active involvement of the private equity team, a principle frequently highlighted by his associate Henry Kravis of KKR, who believes that the real indicator of success lies not in the purchase of a company, but in its lucrative sale. The buying is only the first step, and there is nothing to celebrate until the final exit if that sale doesn't result in a sizable profit for investors. A consortium focused on private equity has obligations that go further than just finalizing transactions or taking ownership of a business.

Choices that extend beyond short-term...