[News Space=Reporter seungwon lee] T2 Private Equity (T2 PE), a new private equity fund management company affiliated with Taekwang Group, is attracting attention from the business community and financial market. Established in December 2024, this PE house is majorly owned by Taekwang Industrial (41%) and IT affiliate Tsis (41%), and Chairman Lee Ho-jin's eldest son Lee Hyun-joon (31 years old) and eldest daughter Lee Hyun-na each invested 9%, with the siblings holding 1.8 billion won of the 10 billion won in capital.

This is one of the highest proportions of direct equity participation by the owner's family among domestic large corporate private equity funds.

T2 PE Structure and Fund Flow… Analysis of ‘Preliminary Preparation’ for Succession Funds

Looking at T2 PE's profit distribution structure, the cash generated from operating performance is accumulated in the corporation and can then flow to the third generation of owners in the form of dividends, etc.

The shareholding structure of Tisis is Taekwang Industrial (46.33%), Daehan Synthetic Fiber (31.55%), and Lee Hyun-jun (11.3%). In other words, the profits of T2 PE are directly and indirectly flowing to Tisis and Lee Hyun-jun.

PE's Role as a Succession Fund Window

The number of cases where PE (Private Equity) is utilized in the succession process of large domestic companies is gradually increasing. As of 2023, it was reported that 7 out of the top 30 domestic conglomerates secured funds for management succession through private equity funds in which the owner family directly holds shares.

There is also analysis that T2 PE could serve as a catalyst for the third-generation succession through dividends worth hundreds of billions of won or an increase in share value depending on future operating performance.

After Chairman Lee Ho-jin’s reinstatement… ‘3rd generation system’ begins?

Chairman Lee Ho-jin (63 years old) was pardoned and reinstated in August 2023, but his return to management is uncertain due to health issues. His eldest son Lee Hyun-joon (31 years old) is currently expanding his stake in major affiliates such as TSIS and T2 PE. The prevailing analysis in the business world is that “the possibility of management succession in the short term is low, but preemptive fund raising is essential.”

Case of succession using PE of domestic large corporations

Hanwha Group secured funds for the third-generation succession through Hanwha Asset Management PE and paid dividends worth 120 billion won as of 2022. Of this, the 80 billion won in dividends received by the owner family was reportedly used to increase the stakes of the third-generation Hanwha Group members, purchase stocks in affiliates, and secure inheritance tax funds. In fact, the analysis is that these funds were mobilized in the process of the third-generation Hanwha owners increasing their stakes in major affiliates between 2022 and 2023.

A financial investment industry insider emphasized, "Hanwha Group is considered a representative case among large domestic corporations in which the owner's family secured succession funds through a private equity fund (PE)." He added, "Hanwha Asset Management PE's large-scale dividend is evaluated as a symbolic event that served as the 'bullet' for establishing the group's third-generation system, while also showing changes in the governance structure of large corporations and the trend of utilizing private equity funds in the capital market."

LS Group also increased the owner family's stake through LS PE, paying dividends worth 90 billion won as of 2023. Japan's Mitsubishi Group and Europe's Lombard Audier have also used PE, in which the owner family directly invested, as a source of succession funds.

Industry/Market Reactions and Risk Factors

A financial industry insider said, “It seems clear that T2 PE will become the actual financial foundation of the third generation of the group,” and pointed out that “the key is the operating performance, transparency, and conflict of interest risk management of the new PE.”

According to the Financial Supervisory Service, the average direct investment ratio of the owner family in the domestic PE market in 2024 is around 7%, with Titu PE (18%) significantly exceeding the industry average.

T2 PE, 'Succession Bullet' and Risk Factor... Key to Transparency and Improvement of Governance Structure

T2 Private Equity is emerging as a key funding source for the third generation of Taekwang Group. Depending on the performance, dividends in the hundreds of billions of won and an increase in share value are expected, but the transparency and governance risks of the new PE house are also raised.

Along with the future achievements of large-scale M&As such as Aekyung Industrial, the market's attention is focused on whether this will become the actual foundation for the group's third-generation system.