Global Big 4 PEFs Nesting in Korea... "Now is the Opportunity" Targeting Prime Assets

Accumulated Listings in Domestic M&A Market
Judging the Right Time to Invest in Prime Companies
Increasing Recruitment of Korean Investment Experts
Global No.1 Blackstone Also
Reestablishes Korean Corporation After 8 Years

[Asia Economy Reporter Park So-yeon] Global private equity funds (PEFs) are analyzing that now is the right time to invest in valuable domestic companies or assets. While the domestic financial market is focusing on risk management and hesitating, global funds aiming to seize opportunities are formulating aggressive investment strategies.

Currently, foreign asset management firms such as KKR, Carlyle, TPG, Bain Capital, CVC, Baring PEA, and Affinity Equity Partners operate offices in Korea and are increasing the hiring of Korean investment professionals. In particular, KKR recently expanded its workforce to 30 people, and the European PEF EQT Partners even acquired Baring PEA.

The world's number one private equity fund, Blackstone, also re-entered Korea this year. About eight years ago, Blackstone withdrew its office after failing to achieve significant results in the Korean market, but this year it ambitiously established a Korean corporation. It built a strong lineup by recruiting Ha Young-gu, former chairman of the Korea Federation of Banks, a financial heavyweight, and Kim Tae-rae, a real estate investment expert from global competitor Angelo Gordon, as CEO.

A leading domestic PEF official said, "While it may not be easy for global PEFs to immediately stand out in the domestic mergers and acquisitions (M&A) market due to the need for human networks, it is true that the strong dollar situation gives them an advantageous market."

Recently, there has been an accumulation of sell-side assets in the domestic M&A market. Food and beverage companies such as Mad for Garlic, Bas Burger, and Burger King, as well as Lotte Card, Modern House, and Able C&C, have been put up for sale, but no buyer movements have been observed. The impact of global interest rate hikes has hit the Korean market hard, causing buyers to hunker down and wait for the storm to pass.

Not only large assets but also startups and mid-sized companies facing financial difficulties are flooding the market. From the perspective of companies struggling to attract investment, they have no choice but to sell shares or management rights at low valuations. There is also a growing possibility that companies facing financial difficulties just before going public will have their shares secured at this time and consider value-up (increasing corporate value) while observing the market atmosphere.

An IB industry official said, "Global PEF operators are expanding their Korean business by targeting undervalued quality assets whose prices have fallen," adding, "They are expected to pursue aggressive strategies similar to those of overseas PEFs during the Korean foreign exchange crisis, when assets were purchased at low prices to achieve high returns."

Meanwhile, continuous interest rate hikes are clearly acting as a negative factor in the M&A market. The impact of interest rate increases directly burdens buyers in the process of raising funds. Recently, large-scale M&A deals such as buyouts (transfer of management rights) and share acquisitions by domestic private equity funds have virtually disappeared, and new fund formations are also facing difficulties.

In fact, Stonebridge Capital, which signed a contract to acquire massage chair company Bodyfriend in November last year, reportedly faced difficulties raising project funds and only recently completed the final payment. Nearly half of the approximately 400 billion KRW transaction amount was raised through LPs, taking more than eight months to secure the funds. Typically, domestic LPs require a minimum expected annual return of about 7-8% when committing to private equity fund investments. Currently, loan interest rates in the acquisition finance market exceed the expected returns of LPs.

This content was produced with the assistance of AI translation services.