Home-grown PEFs with $90 billion ammunition are primary force behind Korean M&As

2021.06.08 14:08:04 | 2021.06.08 15:12:34

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

Home-grown buyout funds in Korea have amassed $90 billion, becoming major force in the Korean M&A market.

Funds private equity players pulled in from large limited partners including pension fund operators and other major institutional investors amounted to 100.5 trillion won ($90.4 billion) by the end of March, according to the Financial Supervisory Service data on Monday. The amount has ballooned more than 250 times since 2004 when PEF investment was first introduced in Korea and more than doubled since 2013.

PEFs drew in more than 3 trillion won per quarter in recent years due to big pledges by institutional majors like pension funds and insurers.

Of 20 biggest M&A deals made in Korea last year, 10 went to PEFs. Three were in-house trade and excluded from the count.

Private equity firms were also behind a half or nine out of 18 major M&A deals carried out from January to April this year, according to reports from accounting firm Samil PwC and researcher Mergermarket.

Local players have so far kept up a strong track record.

이미지 확대
Of 879 investments made from 2005 to 2019, just 30 deals failed to make profit. Their failure rate was 3.4 percent, half of the global 6 percent average.

PEFs’ grip over company operations is also growing as their investment expands. Local activist fund KCCI is credited for improving governance and management practice at Hanjin KAL which had been notorious for owner family-related scandals.

Fund operators have shown a knack of turning around distressed companies and make profit in just short period of five years.

Hahn & Company, a local PEF that took over scandal-ridden Namyang Dairy Products last month, has vowed to reorganize the dairy producer but to retain Namyang’s existing employees. It also said it won’t sell back its stake to the company’s founder who stepped down from the management after a marketing controversy.

PE firms are also active supporters for ESG push. IMM Private Equity has transformed Taelim Packaging to add wastewater treatment business after takeover. The firm also paid Taihan Electric Wire’s employees overdue wages after acquisition.

By Kang Doo-soon, Jin Young-tae, Park Chang-young and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]