By Cho Jin-seo
Staff Reporter
Doosan Group celebrates its 111th anniversary today, hoping that the $4.9 billion acquisition of a U.S. construction company can be a stepping stone to becoming a truly globalized player.
Doosan Infracore, the group's construction equipment firm, inked the deal on Monday to acquire the construction-vehicle business from Ingersoll-Rand. It was by far the largest foreign purchase by a South Korean firm, and the only sizable deal made this year.
A bold decision from top management and openness to foreign culture and outside advice enabled Korea's oldest business go ahead of other conglomerates in taking advantage of the global M&A boom.
Unusual for a Korean firm, Doosan said it will let a local person run the newly acquired company instead of parachuting in a Korean executive. Other big firms such as Samsung Electronics have Korean executives running their overseas subsidiaries and branches.
``Korean firms often misunderstand the nature of merging. They send a Korean CEO and try to make the local employees adapt to Korean culture. But we don't do things like that,'' a group spokesman said. ``We try to understand the local culture first and wait patiently until the two cultures merge. We don't want it to be a unilateral relationship.''
Successful acquisitions and bold sales of unprofitable businesses over the past 10 years have allowed Doosan to grow 20 times over the past five years in terms of market capitalization, transforming itself from a food and beverage seller to a leading heavy machinery and construction firm.
The case also showed that Doosan is currently the only Korean conglomerate that is interested and capable of doing such cross-border deals.
Before the Ingersoll-Rand deal, the only sizable acquisition by a Korean firm since last year was the purchase of Babcock, a British power plant engineering firm, by Doosan Heavy Industries for 151 billion won ($165 million).
Babcock is also run by a local executive without much interference from Doosan headquarters, the group said.
Some $2 trillion in deals has been unveiled between January and May this year globally, putting it on track to smash the record set in 2006 by a whopping 60 percent or more, according to the Economist magazine. But Korean conglomerate including Samsung, Hyundai and LG was involved in a major M&A deal.
``We have suffered from hard times that others have never experienced. We have come to have a strong instinct of survival,'' the spokesman said. ``The major shareholders made swift decisions, such as the sale of the brewery business in the 1990s, which was the group's first business. We even sold our headquarters building before. With this money we could rebuild the group.''
Monday's deal is the work of a joint taskforce team of Doosan and McKinsey, a consulting firm. The two have had a close relationship over the past 10 years and the team has been operating for at least the past seven years, the spokesman said. A McKinsey consultant who refused to be named also confirmed it.
The McKinsey pool has been deeply involved in initializing Doosan's reform drive. James Bemowski, vice chairman and CEO of Doosan Corp., had served as the regional chief of McKinsey & Company Korea from 1992 to 1998.
It was under his supervision in 1996 that Doosan sold off its non-core businesses to improve its cash flow.
His McKinsey experience also led to the hiring of Seong Nak-yang, the former Yahoo CEO. Seong worked at the consulting firm's Seoul office between 1996 and 1998.
Doosan Infracore's chief strategic officer Kim Yong-sung was a partner in McKinsey, too.