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Korean M&A market sees decline in large buyouts Minority stake investments and infrastructure deals dominate market in last two years

Translated by Ryu Ho-joung 공개 2021-10-26 08:08:20

이 기사는 2021년 10월 26일 08:06 더벨 유료페이지에 표출된 기사입니다.

After a pandemic-induced pause, the South Korean mergers & acquisitions market has seen a surge in transactions so far this year. But large buyout deals have reduced significantly compared to previous years.

Nearly 55 trillion won ($47 billion) worth of deals closed in the first nine months of 2021, up from 35 trillion won year-over-year, according to data from the bell Plus. The deal value even exceeded the total for the whole of 2019 which was before the start of the Covid-19 pandemic.

What is notable is a sharp decline in value of buyout deals led by private equity firms. Instead, the market was dominated by cross-border transactions by strategic investors, infrastructure deals and minority stake investments.

Four of the 10 largest transactions in the nine months through September were private equity deals. They included Centroid Investment Partners’ 2.13 trillion won acquisition of TaylorMade Golf, MBK Partners’ 1.55 trillion won investment in restaurant company BHC – which was additionally made after the private equity firm’s first investment in 2018 – minority stake investments in online lender K bank totaling 1.25 trillion won by investors including Bain Capital, and IMM Private Equity’s 1.09 trillion won purchase of SK Lubricants’ stake.

In 2020, private equity investors involved three of the top 10 deals in the year, two of which were buyout deals. They were Macquarie’s 2.5 trillion won acquisition of Daesung Industrial Gases and Hahn & Company’s 990 billion won purchase of Korean Air’s in-flight catering business.

Few buyout deals over the past two years stand in contrast with the three years through 2019 when large buyouts led by private equity firms boosted the M&A activity.

In 2019, SJL Partners completed a 3.5 trillion won takeover of US-based Momentive Performance Materials in partnership with KCC. Other notable buyouts in the year included MBK Partners’ 1.38 trillion won purchase of Lotte Card, IMM Private Equity’s 1.3 trillion acquisition of German industrial gases group Linde’s South Korean assets, and Blackstone’s 1.1 trillion won purchase of pharmaceutical distributor Geo-Young.

Among notable private equity deals in 2018 were Macquarie’s 2.97 trillion won takeover of security service provider ADT Caps in partnership with SK Telecom, Hahn & Company’s 1.5 trillion won acquisition of SK Shipping, and KKR’s 1 trillion won purchase of LS Automotive’s copper foil business.

Buyout deals by large private equity firms have slowed down significantly in the Korean market. Michael Kim, co-founder and partner of MBK Partners, said in an annual report in April, “This is the time to make investments.” But no buyout of Korean companies by the private equity firm, focused on investment opportunities in Northeast Asia, has been announced in the past two years.

There have been no buyout deals involving KKR in the Korean market in the last four years as well. Instead, the US firm appeared to focus on infrastructure investment opportunities, acquiring waste management company Eco Green Holdings for more than 800 billion won from Anchor Equity Partners in 2020. It bought a 600 billion won stake in Hyundai Global Service in June this year.

Notable deals involving Carlyle Group in the past two years included minority stake investments in KB Financial Group and Kakao Mobility. Bain Capital also just purchased minority stakes in K bank and Douzone Bizon this year.

Blackstone is said to plan to open its Seoul office as part of efforts to expand its Korean presence. But its buyout activity in the country has been dormant since the Geo-Young takeover.

Several large-size companies were put up for sale this year, including Yogiyo, eBay Korea and Hanon Systems. Large private equity firms, which are flush with cash, at first showed interest in those companies but have been cautious in bidding for them. Yogiyo and eBay Korea were sold to strategic investors Emart and GS Retail respectively.

“The trend of few large buyout deals is likely to continue with the market expected to be dominated by mid-sized deals until next year,” an industry insider said. (Reporting by Hee-yeon Han)
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