The parent-flip: a subsidiary swallows its parent’s core business (2005)

What a reverse capital flow left behind

Normally, when a Japanese company expands abroad, the domestic parent sets up an overseas subsidiary and brings the local business under its wing. Nexon’s 2005 reorganization ran the other way: it chose to consolidate a business born in Korea into the Japanese corporate shell it had established first. Having acknowledged that the wellspring of its development strength lay on the Korean side, the decision to house the core of the business in a Japanese vessel nonetheless can be read as carrying a certain logic as a design for international growth. One can also detect an intent to keep the Japanese market — with its easier access to financing and to a public listing — open as a future option.

At the same time, the structure this single move created — Tokyo as the legal home, the breadwinner overseas — would govern Nexon for a long time to come. The framework in which the founding family stays at the very top of the group through an asset-management company while entrusting the front line of management to professional executives was also formed within this reorganization. That one corporate split and share transfer settled the skeleton of the capital structure and management system for the next twenty years is where the long reach of this decision shows itself.