“Entrepreneurship,” arguably the trendiest word of our time when people have lost their faith in financial juggernauts and conglomerates, became so overused that it has no clear definition. For Gene Yoon, the chairman of sportswear brand Global Fila and golf equipment maker Acushnet, the term is about risk taking.
“Challenging the unknown world is terrifying, and not anyone can do it. But you must take unknown risks in order to attain high returns. Entrepreneurs are no cowards,” said Yoon, who is also known as his Korean name Yoon-soo.
Grand prize
Business Focus met Yoon at a dimly lit private room in a cafe at Hotel Shilla. The luxury hotel owned by the Samsung family was hosting a red carpet event that day. Men came in tuxes and ladies in floor-length evening dresses, creating a rare scene to be seen in Seoul.
The hero of that night was Yoon, who was going to win the “Ernst & Young Entrepreneur of the Year” award. The global audit and consulting firm would award five entrepreneurs of Korea, and the top honor — the master prize — was Yoon’s. The black bow tie looked good on him.
Gene Yoon, the chairman of Global Fila and Acushnet, delivers an acceptance speech after winning the master’s prize at the 2012 Ernst & Young Entrepreneur of the Year Korea award in Hotel Shilla, central Seoul, Nov. 22. / Courtesy of Ernst & Young Korea
In his inner pocket, he prepared an acceptance speech. He was going to talk about why Korea needs more entrepreneurs. He hopes the country does better in encouraging entrepreneurs instead of killing the “animal spirit” of businesspeople.
“The weakness of capitalism is that the wealthy makes a lot of money and the poor don’t. There should be corrections made on this cycle,” Yoon said.
“When society fosters entrepreneurs who take risks, do their best, succeed and achieve high returns, there will naturally be a positive circulation of wealth. People will also have the hope that a guy like myself can make it.”
Risk taking
In May 2011, Fila and Mirae Asset Private Equity Fund (PEF) bought Acushnet from Fortune Brands for $1.23 billion. Fila was going to manage the company, and Mirae Asset secured investment from National Pension Service, the world’s fifth largest pension fund, and the state-owned Korea Development Bank.
Koreans, many of whom are golf enthusiasts, couldn’t believe that high-end golf brand Titleist and esteemed shoemaker FootJoy were now controlled by the Korean capital. The acquisition has been celebrated as the best deal done by Korean companies.
Behind the glamour, however, the acquisition remains a risky bet to Yoon. When Fila and Mirae Asset bought Acushnet, Fila invested only $100 million out of the $1.23 billion paid to Fortune Brands.
The rest came from financial investors who required Acushnet to be listed on the stock market by 2016. In short, Yoon’s job is to manage the company well and boost its value and help investors reap capital gains and exit.
His more imminent goal is to double Acushnet’s earnings before interest and taxes by the end of 2015.
“If I fail to achieve that, I will be deprived of all my assets including shares in Fila,” Yoon said, indicating that they are held as securities to the loans.
In the meantime, Fila has been given the right to buy back shares from the investors and ultimately the opportunity to become Acushnet’s major shareholder.
Yoon said that he will be able to talk about the creation of a synergy effect between Fila and Acushnet only when the former fully takes over the latter. Investors do not want the businesses of Fila and Acushnet to be combined yet, he added. For instance, Acushnet will launch the clothing line of Titleist next year in Korea, Japan and China while Fila continues to produce its golf apparels.
“That’s the hidden meaning behind why I carry two business cards — one for Fila and the other for Acushnet — although I would very much like to save on paper,” Yoon said with a laugh.
The chairman, in fact, had taken similar risks with the buy-out of the full stake in Fila Korea in 2005 and Fila Korea’s acquisition of the global rights to the Fila brand in 2007.
Back in 2005, Yoon led the “management buy-out” of Fila Korea, the deal that turned the company from a subsidiary of a foreign company into a genuinely domestic firm.
He formed a consortium with executives and employees of Fila Korea and domestic investors and banks, which bought the full stake from Fila’s New York-based holding company, Sports Brands International.
Two years later, he tried an even bolder deal described as “the tail conquering the head.” In order to acquire Fila Luxembourg, the entity that owned all the rights to the Fila brand, Yoon drew several financial investors including Samsung Securities that bought each Fila Korea share at 20,000 won. Yoon pledged to take the company public, and did so in October 2010 with an initial public offering (IPO) price of 35,000 won.
Fila Korea stocks has been moving in the vicinity of 60,000 won while the shares of most companies that went public in 2010 — notably, those of Samsung Life Insurance — are underperforming their IPO prices.
The biggest benefit of the acquisitions so far would be the immense boost in Fila’s brand value. Fila, despite its Italian heritage, now represents Korea’s sportswear, and was chosen as the official provider of uniforms for the Korean team during the London Olympics this year.
The brand also sponsors the country’s two hottest athletes — swimmer Park Tae-hwan and gymnast Sohn Yeon-jae — and have them as models in its advertisements.
“Sponsoring Park, to be honest, is more of a business decision. The sponsorship for Sohn is different for its long-term nature. We’ve been supporting her since she was very young,” Yoon said.
When asked if he has any plans to get new models for golf equipment brands, he said that Acushnet already supports hundreds of golfers including Jason Dufner, Kyle Stanley and Webb Simpson. He did feel that Rory McIlroy’s departure from Titleist for Nike was a loss.
“Rory McIlroy will be with us until the end of December. He was given much more money (by Nike), and if we cannot match it, we should let him go forward. We cannot stop him from better opportunities,” Yoon said.
M&A for expansion of economic territory
Yoon is now known as Korea’s most experienced in handling mergers and acquisitions (M&A) at global scale. He said that although Korea has developed much, fostering a truly global company still remains a challenge and acquiring one instead may be a more efficient path.
As the global economic crisis still lingers, fine companies are being offered for sale at bargain in the global M&A markets and Yoon urged Korea to expand the country’s “economic territory” by acquiring them. He forecasts that Koreans would be able to have such opportunities for shorter than the next five years because the wealthier China is expected to dominate the markets soon.
Yoon admitted that he is interested in three or four companies offered for sale, but his hands are tied. When Fila acquired Acushnet, the company pledged to financial investors that it would not acquire another company until the missions is accomplished so that both Fila and Acushnet remain financially healthy.
When asked which companies he is keen on, he said, “I shouldn’t mention their names because it might affect the deals.”
In a way, the ban on additional M&As was another risk Yoon had to take for purchasing Acushnet. Gone are the opportunities for him to attain good deals when too little time is left.
Yoon said that the acquisition of a Korean company by a Korean company is relatively an easy job, but that of a foreign company is not. The latter requires a staff who are fluent in English and have experience in managing global companies, but Yoon said there aren’t many of them in Korea.
He often boasts his fluency in English, the language he learned while serving in the military at the U.S. base and mastered while travelling for businesses. And with no business degrees, he gained skills in M&As in a hard way through experiences.
“Business schools do not teach you innovative strategies. Speaking of case studies that are popular teaching methods in MBA programs, the power of a strategy is completely gone once it is open to the public. The same strategy doesn’t work twice. You cannot make money with the same method. The really working strategy comes from your experience,” he said.
Yoon divided a typical M&A into four stages: negotiating, raising funds for the deal, managing the company and rewarding investors, usually through an IPO.
The most important stage is the third one — managing the company and boosting its value, which, he said, needs a talented staff the most.
“Korean companies aren’t actively buying global firms because they aren’t confident that they can successfully manage the companies,” Yoon said.
“There are only a few who can, and that’s why I make money. I am a patriot. I am helping Korea to expand its economic sovereignty.”
Learn from failures
When he gives speeches and interviews, he always emphasizes the importance of failures.
Dubbed “a legend of salaried employees,” Yoon is one of few Koreans who started as an employee of someone else and now leads a large corporation. He is a late bloomer who had gone through a series of devastating failures. Surprisingly, he said applying to the medical school of Seoul National University three times but never getting admitted has been the biggest letdown of his life.
Yoon was born in a village in Hwaseong, Gyeonggi Province, in 1945, the year of Korea’s independence from Japan. His mother died of typhoid 100 days after he was born, and he was raised by his aunt who was abandoned by her husband. Yoon’s father died of lung cancer when Yoon was a junior in high school, so he was deeply determined to study medicine at the prestigious public university in order to become an expert of the nature’s most feared killer.
“My dad’s only wish was to live until I got married. When he passed away without seeing me marry, I was tremendously shocked,” Yoon recalled.
After the first two failed attempts, he briefly studied at the dental school at Seoul National University but quit because he did not see the point of becoming a dentist. He tried one more time, but ended up studying political science and diplomacy at the Hankuk University of Foreign Studies. By the time he graduated from college, he was 28 (30 in Korean age).
“Failing three times dealt a great psychological damage to me, but in the long run, it made me humble. I am still sad that I couldn’t become a doctor, so I am extra humble in front of doctors,” Yoon said.
The chairman said that the biggest weakness of those who never fail in their lives is hubris, adding that Guan Yu, a general from Chinese epic Romance of the Three Kingdoms, was killed because of his arrogance.
“Humble people are the ones you should be afraid of. You cannot buy failures and humility with money. Failures also teach you the strategies of how not to fail in the next project. Once you have failed, you struggle not to make the same mistake again,” Yoon said.
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