In the domestic market, private equity funds have become firmly associated with corporate restructuring and job insecurity. Although a series of negative incidents has led to a more skeptical view, there are actually many cases where these funds have saved and grown companies.

Edaily has spotlighted cases where private equity funds invested in growth rather than workforce reductions, thereby boosting corporate value. Through examples of companies that faced concerns and misunderstandings simply because they were acquired by private equity funds but successfully turned their businesses around, we examined how the funds’ recruitment of professional managers, global expansion, and job creation led to improved performance and growth.

Through this, we aim to highlight that investment approaches and management strategies determine a company’s success or failure, and to underscore the need to reconsider the prejudices surrounding private equity funds. [Editor’s Note]

[E-Daily Marketin Reporter Song Seung-Hyeon ] When a private equity (PE) firm acquires a restaurant chain, the first area it typically targets is labor costs. The standard approach is to reduce the number of locations, adjust part-time staff, lower fixed costs, and then resell the business. However, Outback Steakhouse Korea, acquired by SkyLake Equity Partners (SkyLake) in 2016, took the opposite approach. It increased its workforce and stopped selling certain cuts of meat. Five years later, at the time of its sale, operating profit was nine times what it was at the time of acquisition.

From 110 stores to 70… A debt-free acquisition of a struggling company

According to the investment banking (IB) industry on the 14th, SkyLake acquired a 100% stake in Outback Steakhouse Korea from U.S.-based Blooming Brands in July 2016 for approximately 57 billion won. It invested the entire amount as equity using funds from its 8th blind fund, the New Growth Buyout PEF, and did not utilize acquisition financing. The stake was held by LakeSide Dining, a special purpose company (SPC). During negotiations, SkyLake also secured a condition to lower the royalty rate paid to the U.S. headquarters from the 4% range to 3%.

Outback is one of Korea’s leading family restaurants, having opened its first location in Deungchon-dong, Seoul, in 1997. In 2008, it became the first in the industry to open its 100th location, and in 2010, it rose to the top spot among family restaurants with 102 locations. However, as the industry entered a downturn, Marche and Sizzler withdrew in 2013, followed by Bennigan’s in 2016, and Outback also faced difficulties. The number of stores, which stood at around 110 in 2014, was reduced to 75 in 2015 after closing the bottom 34 underperforming locations, and further decreased to about 70 around the time of the sale; the company posted an operating loss of 15.7 billion won in 2014.

At the time, there were repeated claims that Outback’s crisis stemmed from its business model. In reality, the company relied on high-volume, low-margin sales—driven by discounts through partnerships with telecom carriers—to attract customers, while store management and food quality took a back seat. Although it marketed itself as a steakhouse, it used frozen meat, and service repeatedly broke down due to staff shortages during peak hours when discount customers flocked to the restaurants. Blooming Brands decided to put its Korean operations up for sale because it had concluded that the local business had reached its limits after its 2010 attempt to sell its operations in Korea, Japan, and Hong Kong fell through.

Cut Discounts and Dropped Certain Cuts… Sold for Six Times the Original Investment

The first thing SkyLake cut back on was discounts. At a time when customer numbers were declining, it drastically scaled back affiliate discount promotions. Regarding staffing, it chose to increase headcount rather than cut it. Refusing to accept the staff reductions repeatedly demanded by the U.S. headquarters, the company used 10 years’ worth of time-slot-specific sales data to raise the accuracy of workforce demand forecasting from 45% to 85%, thereby deploying more staff where needed. Over the entire investment period, total employment increased by about 15%, and the turnover rate for part-time staff fell by half.

SkyLake also accepted losses on its products. The company switched from frozen to refrigerated distribution, increased the weight of steaks from 180g to 200g, and discarded cuts containing tendons and sciatic nerves. At the time, industry analysts estimated that this disposal resulted in annual losses of around 10 billion won. In July 2017, the company launched a 700g to 1kg tomahawk steak made from the top 1% of Black Angus cuts. Within two years of its launch, cumulative sales reached 500,000 units, and the product was re-exported to Outback in Hong Kong. In September 2019, the company introduced delivery service starting with the Seocho branch and expanding to about 60 locations, generating 27 billion won in delivery revenue within a year. Following store renovations, the proportion of newly renovated locations rose from 20% to 85%. CEO Jo In-soo, who previously worked at P&G and Yum Brands, remained in his position to steer the company’s direction, while CEO Shin Ik-chang—who joined as Chief Operating Officer (COO) in 2014—took charge of day-to-day operations.

Revenue grew from 194.2 billion won in 2016 to 254.2 billion won in 2019, 297.8 billion won in 2020, and 392.7 billion won in 2021. Operating profit increased more than ninefold, from 2.5 billion won to 23.5 billion won in 2020, raising the operating profit margin from 1.3% to the 8% range. The average check rose from 19,209 won to 26,147 won, and the share of premium steak sales increased from 21% to 51%.

The acquisition structure made this approach possible. Since the company did not use acquisition financing, there was no initial interest burden, and the annual savings of several billion won from reduced royalty fees provided the financial flexibility to reinvest in stores, distribution, and employment. Only after performance improved did the company take on debt, recouping 45 billion won in December 2018, 63 billion won in February 2020, and 110 billion won in March 2021 through dividends. The sale was finalized in July 2021 when BHC Group was designated as the preferred bidder, and in September, a Share Purchase Agreement (SPA) was signed to transfer 100% of the shares for approximately 300 billion won. The total recovery, including dividends, was nearly six times the original investment.

Based on this case, academic analysts have concluded that acquisitions by restructuring-focused private equity funds do not necessarily lead to job losses. Outback is regarded as a case study in which the company improved its performance by changing business practices and products without laying off employees.