Overseas private equity funds (PEFs) have once again swept up trillion-won-scale M&A (mergers and acquisitions) deals in Korea this year. It is analyzed that institutional improvement proposals emphasizing the responsibility of domestic PEFs, introduced following the Homeplus incident that began last year, also had a negative impact amid the shrinking scope of business activities. Unlike domestic PEFs, overseas PEFs, which exist in regulatory blind spots, are eroding the market, raising concerns that the deal pipeline for domestic brands such as MBK Partners, VIG Partners, and Glanwood PE is dwindling.
According to investment banking (IB) industry sources on the 22nd, this year’s large-scale trillion-won deals were led by overseas PEFs including KKR, TPG (Texas Pacific Group), and Carlyle. While there have been cases where domestic brands participated in consortiums with overseas brands, it is difficult to find instances where a domestic brand independently handled a deal with a sale price exceeding 1 trillion won.
The large-scale deal known to the market is AI infrastructure specialist SK Horizon, which a KKR consortium agreed to invest in last August. The total deal size is 380 billion won. KKR will invest 188 billion won to first acquire SKT’s stake and subsequently purchase newly issued shares worth 120 billion won. Domestic private equity funds IMM Investment and Stonebridge Capital joined the deal as part of a consortium with KKR.
In the same month, TPG signed a contract to acquire a controlling stake in Lotte Rental, the top operator in Korea’s car rental market. TPG will purchase 61.2% of Lotte Rental shares held by Hotel Lotte and Busan Lotte Hotel. The transaction price is 59,000 won per share, totaling 131 billion won. The acquisition of Lotte Rental shares is expected to be completed as early as this month.
Earlier in June last year, Carlyle acquired Cheongho Nice. The deal was concluded in August last year under a purchase agreement to buy up to 100% of the shares from the family of Cheongho Nice’s founder. The transaction was finalized during the process of transferring shares within the founder’s family, with funds provided by KARA Asia Partners, Carlyle’s buyout platform.
While overseas PEFs are closing big deals, M&A activities by domestic brands have been relatively small in scale. Glanwood Credit signed a contract in June last year to supply 80 billion won to Megazone. This is an agreement to purchase part of the stakes held by existing financial investors (FIs) who invested in Megazone.
VIG Partners, which is focusing on recovering investment assets from its third blind pool fund rather than new investments, has also not reached 1 trillion won per buyout deal. It recovered investment funds by selling Bonchon International in September last year. The transaction size is reported to be approximately 30 billion won. In addition, contract signings or negotiations are underway for P&C Labs, Yuyoung Industrial, and Auto Plus. Financial investment industry sources estimate the scale of these deals to be under 200 billion won each.
MBK Partners is reported to have signed a share purchase agreement (SPA) in September last year to acquire controlling stakes in Skinidea and Life & Bio from Morgan Stanley PE. The acquisition price is cited as 30 billion won. In addition, target companies for which it is pushing for control acquisitions or sales are mostly Japanese firms, including Altemira Holdings, Sharing Technology, and Japan Wellbeing.
IB industry sources expect the trend of overseas PEFs handling trillion-won big deals while domestic PEFs turn their attention to smaller mid-market deals to continue for some time. This is because government regulations on domestic PEFs have been tightened following the Homeplus incident, which led to consumer damage and large-scale unemployment after the company entered corporate rehabilitation proceedings. Members of the National Assembly are also continuing to propose regulatory bills. Most of these proposals aim to curb domestic PEF business activities through measures such as reducing borrowing limits, strengthening information disclosure, and enhancing internal controls and reporting obligations.
An IB industry official said, “Legislative procedures are underway, or regulations and bills proposed by members of the National Assembly do not apply to overseas PEFs but focus solely on domestic PEFs,” adding, “This atmosphere is expected to continue at least until the end of the year.”
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