이 기사는 2020년 06월 22일 08:00 thebell 에 표출된 기사입니다.

South Korean private equity (PE) firms are struggling to find investors for their project-specific funds created to support materials, parts and equipment sectors.

A PE firm which has been proceeding with its process to acquire a foreign materials, parts and equipment company is facing challenges in finding institutional investors for its project-specific fund, according to industry sources on June 18. The PE firm has reportedly finished conducting due diligence at the beginning of this year, but the deal process is practically halted.

Currently, Korea Growth Investment Corp. (K-Growth), the country’s fund of funds operator, is carrying out its investment program for the materials, parts and equipment sectors. K-Growth started the process to select external managers to create project funds to support the sectors in January. The fund of funds operator plans to commit up to 100 billion won ($82.7 million) to project funds over the next two years, a maximum of 30 billion won to each fund. K-Growth has invested in three PE firms so far, with each received less than 10 billion won.

According to the qualifications set by K-Growth, the funds have to allocate more than 60 percent of a fund size to companies in the materials, parts and equipment sectors.

Multiple PE firms have reportedly tapped K-Growth in a bid to invest in foreign companies in the materials, parts and equipment sectors. However, there has been zero commitment to a fund devoted to foreign companies in the materials, parts and equipment sectors. This is because the K-Growth’s investment program is intended to have positive impact on Korean firms dedicated to those sectors.

Similarly, the Export-Import Bank of Korea participated in an acquisition of U.S.-based Momentive Performance Materials and provided funds to Korea Midland Power which acquired a wind power project in Sweden last year, with an aim to help domestic companies and industries grow.

Against this backdrop, PE firms are moving to join hands with strategic investors to increase the likelihood of fundraising by attracting domestic material, parts and equipment companies to the deal.

Forming a consortium isn’t likely to be easy either, an M&A industry source said. “It is difficult to conduct due diligence on foreign companies due to the Covid-19 pandemic and the gap in expectations between a seller and potential buyers is too wide to attract strategic investors,” an investment banking industry source said.

(Reporting by Byung-yoon Kim)