Daewoo Securities
Daewoo Securities (D/B/A KDB Daewoo Securities) (KRX: 006800) is the largest stock brokerage and investment banking firm by market capitalization in Korea. The company has been a subsidiary of KDB Financial Group since the early 2000s. Its name originates from the large Daewoo Conglomerate of Korea to which it originally belonged.
Review
Daewoo Securities has 3,081 employees in 124 branches in Korea and abroad. It has a marketshare of approximately 9% of the Korean brokerage market, in terms both of trading value and commissions. The stated Business Agenda of Daewoo Securities is to become a worldwide operation, in line with the expansion plans of its parent, the Korea Development Bank.
Daewoo Securities is a full-service brokerage and investment bank with a large client base. As well as being a stockbroker it also has wider wealth management capabilities, aiming to provide for all its client wealth needs. It has rapidly expanded its investment banking offerings, particularly in the area of IPO underwriting, ECM, DCM, and M&A advisory.
History
Daewoo Securities was founded in 1970 as part of the Daewoo Corporation, the second largest conglomerate in Korea after Hyundai. The Daewoo Corporation was better known as an industrial conglomerate, making cars and ships and operating steel works. The South Korean state encouraged large and paternalistic conglomerates to use their capital to expand into unrelated businesses, protected by high tariff barriers and arcane regulations. In this way the car and steel giant Daewoo branched out into dealing in securities.
In the 1990s this strategy hit problems as South Korea opened its markets to foreign competition and at the same time the founders of these conglomerates grew too old to run their creations and passed the reins on to their less focused children.
Daewoo Securities was spun off from the Daewoo Corporation in 1999 when the parent corporation was suffering from a debt crisis. When Daewoo was broken up the securities division was the largest source of profits within the firm. As well as a large number of branches around South Korea, It had an international presence in London and New York City. It was taken over by the Korea Development Bank.
The Korea Development Bank was originally owned by the government of South Korea and its purpose to increase South Korea's industrial base by providing capital to growing companies. It was privatized in the 1990s as part of South Korea's market reforms. However, the Korea Development Bank did not have a large customer base, being essentially a commercial bank with some investment banking offerings. Buying Daewoo Securities, with the largest consumer base of any Korean stockbroker remedied this situation. The bank also wished to buy Lehman Brothers before it went bankrupt, both in order to build its investment banking capability and build its overseas presence.
The Korea Development Bank has developed Daewoo Securities into Investment Banking areas, using its large number of investors as a way of efficiently placing Initial Public Offerings, in much the same way as the American giant stockbroker Merrill Lynch operated in its heyday. It has also sold shares to the public so that the Korea Development Bank now owns less than 40% of the company, although this still means that they in effect control the company as five sixths of the remaining shares would need to be actively opposed to anything that the bank wishes to do.
One of the newer areas that Daewoo Securities has become involved in is corporate finance, where large companies borrow money. Daewoo Securities speciality is in money market operations, and the ability to place a large amount of securities with its large base of retail investors.
Daewoo Securities had been involved in ventures in Central Asian republics such as Uzbekistan. These have mostly been sold to the Korea Development Bank.
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