Private equity funds have emerged as major players in the South Korean merger & acquisition (M&A) market as big institutional investors seeking for high-yield investment amid a prolonged economic slump have lately upped their investments in PEFs.
According to an analysis by Maeil Business Newspaper about the Korean M&A deals that have been disclosed so far this year, PEFs have signed or are expected to sign on 11 out of 18 buyout deals with each worth 100 billion won ($85.5 million) or more. PEFs’ acquisition accounted for 54 percent or 6.29 trillion won in this year’s M&A deals worth 11.6 trillion won in the country, the study showed.
Among the deals, Hahn & Co. offered to pay the largest 1.44 trillion won for Lotte Card, and JKL Partners 400 billion won for Lotte Non-Life Insurance. Linde Korea was sold to IMM Private Equity at 1.3 trillion won, while Geo-Young, Serveone, and Acuon Capital each received an offer of 1.1 trillion won, 602.1 billion won, and 600 billion won from PEFs.
Korean companies, on the other hand, proposed to pay 2.09 trillion won for Daewoo Shipbuilding & Marine Engineering, 1.5 trillion won for Tbroad (with Mirae Asset Private Equity), 800 billion won for CJ Hello, and 400 billion won for Dongbu Steel (with Cactus Private Equity).
Private equity firms’ appetite for Korean M&A deals has sharply grown recently on the back of stable financing from institutional investors that are seeking for higher profits in a prolonged low-growth environment. The National Pension Service (NPS) has pledged a maximum of 2.2 trillion won investment in PEFs this year, and the Korea Teachers` Credit Union is preparing a record high 800 billion won investment.
This is a stark contrast to Korean companies that have been actively seeking for buyout deals overseas to avoid stiff regulations at home.
Global PEFs also are expected to make investments into household big corporate names.
According to Bain & Company, PEFs targeting M&A deals in the Asia-Pacific region sit on highest-ever $317 billion worth cash reserve as of late last year, raising expectations for further growth of investments into Korean companies.
By Han Woo-ram and Lee Ha-yeon
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]