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Speedy sale process for Daewoo E&C faces complaints from suitors Potential buyers complain about short due diligence period and insufficient information

Translated by Ryu Ho-joung 공개 2021-06-17 07:54:05

이 기사는 2021년 06월 17일 07:50 더벨 유료페이지에 표출된 기사입니다.

Suitors for Daewoo E&C are complaining about a short due diligence period and insufficient information to prepare bids, as KDB Investment proceeds with a sale process for its controlling stake in the construction firm in an unusually speedy manner.

Korea Development Bank (KDB)’s mergers and acquisitions division and BoA Securities, which are managing the sale, have set the deadline for submitting binding bids by next Friday, industry sources said. They are said to be encouraging potential buyers to submit serious offers.

But some of the suitors said they were embarrassed by the seller pushing a speedy process. Daewoo E&C has long been considered as a potential candidate for sale, but the seller began the sale process in earnest only a few weeks ago.

Potential buyers interested in bidding for Daewoo E&C include Jungheung Construction, a consortium consisting of DS Networks, SkyLake Equity Partners and IPM Group, and private equity firms IMM Private Equity and MBK Partners.

The seller skipped the preliminary round of bidding, probably under the assumption that there was enough communication with potential buyers before the formal sale process was kicked off. It is said that the seller focuses on finding a buyer that is serious about buying.

However, the grumbling about a short due diligence timeframe is growing among potential buyers. Typically, a seller provides bidders about six weeks for detailed due diligence before receiving binding offers. The period can be extended depending on deals.

Potential buyers of Daewoo E&C are complaining that they have been given a significantly short time to complete due diligence.

They also pointed out that information provided by the seller was not sufficient to analyze the target.

“Much of the company’s information available in a virtual data room is obtainable from its annual reports,” said an investment banking source, adding that this, combined with a short due diligence period, makes potential buyers more difficult to prepare binding bids.

The speedy sale process also raises concerns with respect to potential buyers’ fundraising plans. KDB Investment is said to be seeking a value of 2 trillion won ($1.8 billion) for its 50.75% stake in Daewoo E&C. Given the large size of the deal, potential buyers need to draw up tentative plans to finance the acquisition cost before submitting final offers. But they said they don’t have enough time for that.

Some are questioning whether the seller is truly willing to offload its stake. Others speculate that there could be a buyer that the seller has in its mind.

“Pushing a speedy process could be part of the seller’s strategy to encourage potential buyers to participate in the bidding,” an industry insider said, but adding that submitting binding offers without sufficient due diligence information is clearly a burden for potential buyers. (Reporting by Hee-yeon Han)
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