[비즈한국] There is a growing trend of consulting firms moving beyond their original roles of providing strategic advice and stepping into the forefront of management by becoming the largest shareholders of pharmaceutical companies. While this has strengthened their influence amid management disputes and succession processes, there are rising concerns about management stability due to questions regarding the actual operational capabilities of these small-scale consulting firms.
According to industry sources on the 24th, four individuals associated with Brand Refactoring, the largest shareholder of Dongsung Pharmaceutical002210 (Ham Young-hwi, Yoo Young-il, Lee Sang-chul as executive directors, and Won Tae-yeon as an outside director), joined the board of directors following an extraordinary general meeting of shareholders held on the 12th.
Brand Refactoring secured a majority, effectively taking control by sidelining three existing executives, including CEO Na Won-kyun, Executive Director of Management Strategy Won Yong-in, and outside director Namgoong Kwang. Brand Refactoring, a brand consulting firm established in August 2022, became the largest shareholder overnight in April by purchasing a 10.8% stake from former Dongsung Pharmaceutical Chairman Lee Yang-gu for 12 billion KRW. By doing so, they have jumped into the middle of a management dispute, siding with the former chairman against CEO Na.
In June, the largest shareholder of Korea Union Pharm080720 was changed to the management consulting firm Melvin F&B. This resulted from Melvin F&B exercising its pledge rights on 1,576,556 shares provided as collateral by former Chairman Baek Byung-ha and his wife, Ahn Hee-sook. Killington Ltd., which emerged as a major shareholder of Hanmi Science008930, is also a special purpose company (SPC) established by La Defense Partners, which advised the Hanmi Pharmaceutical Group owning family on raising funds for inheritance taxes. As of July, Killington Ltd. held a 9.81% stake in Hanmi Science, making it the second-largest shareholder after Shin Dong-guk, Chairman of Hanyang Precision (16.43%).
Pharmaceutical companies often partner with consulting firms to reset strategies or reorganize in line with the changing domestic and international pharmaceutical markets. This includes acquiring GMP (Good Manufacturing Practice) certification for overseas expansion, licensing, imports/exports, and developing strategies for technology exports and acquisitions. JW Holdings096760 signed a service contract with the global consulting firm McKinsey last year to strengthen business competitiveness and devise restructuring plans. Unlisted biotech companies also receive help from securities firms, accounting firms, and consulting companies when preparing for M&A or IPOs.
However, the recent trend shows consulting firms expanding their roles beyond simple advice to acquiring equity and participating in direct management. Brand Refactoring is expected to push for the removal of CEO Na Won-kyun at the Dongsung Pharmaceutical board meeting scheduled for the 25th. While removing a director requires a special resolution at a shareholders' meeting, removing a CEO can be done simply through a majority vote by the board.
Korea Union Pharm has been embroiled in a management dispute between former Chairman Baek Byung-ha and former CEO Yang Tae-hyun since October last year, and the company is even facing the threat of delisting from the KOSDAQ due to embezzlement and breach of trust allegations against its management. In the process, Melvin F&B lent 500 million KRW to former Chairman Baek and his wife in February of this year, securing shares as collateral. La Defense Partners also revealed its presence during the management dispute of the Hanmi Pharmaceutical Group owner family.
However, there is significant concern in the industry about consulting firms with small profiles and lack of pharmaceutical experience becoming major shareholders of such companies.
Dongsung Pharmaceutical recorded revenue of 88.4 billion KRW and assets of 147.9 billion KRW last year, whereas Brand Refactoring recorded revenue of 8.4 billion KRW and an operating loss of 533 million KRW. Its total assets are 3.9 billion KRW, and total equity is a mere 70 million KRW. Melvin F&B is also small-scale, with assets of 36 million KRW and total equity of 24 million KRW as of the end of last year.
Consequently, suspicions are being raised about whether there are other funding sources behind these firms, and doubts about the sustainability of the pharmaceutical companies' management are growing. Furthermore, critics argue that consulting firms may be targeting pharmaceutical companies that are in chaotic situations, such as management disputes or succession struggles.
A source in the pharmaceutical industry stated, "There are cases where they approach owner families who have no experience with inheritance taxes or management disputes by highlighting their expertise in risk management. From the perspective of the owner family, solving the immediate crisis is the priority, so they rely on them, and in the process, they end up paying huge consulting fees or handing over equity."