[Analysis of Top 3 Private Equity Funds] ① MBK: Invested Companies Surpass $50 Billion in Revenue

Homeplus, Holding World-Class Small Giants like Dongjin and Gyeongjin Textile, Struggles with Asset Sales as a Painful Issue

Editor's NoteDue to concerns over domestic and international economic downturns, major players in the domestic capital market have focused more on risk management than on 'big deals' throughout this year. Although the market contracted this year, there are forecasts that if the crisis is well overcome next year, opportunities will arise. As we wrap up this year and prepare for the new one, Asia Economy analyzed the investment portfolios of major domestic private equity funds from the perspectives of Strengths, Weaknesses, Opportunities, and Threats. We examined what risk factors they face, the strategies to overcome weaknesses, and their new growth engines.

[Asia Economy Reporter Park Soyeon] MBK Partners is the largest private equity fund in Northeast Asia, managing assets worth $25.6 billion (approximately 32 trillion KRW) as of June. The combined sales of its portfolio companies reach $50 billion (approximately 64 trillion KRW), and the total employment across these companies is 370,000 people. In terms of scale, it ranks within the top 20 among business conglomerates.

▶Strength=MBK shows strength in its portfolio of domestic consumption-oriented companies. Dongjin and Kyungjin Textile, acquired last year, are strong small and medium enterprises supplying shoe fabrics to global sports brands such as Nike, Adidas, Under Armour, Asics, and New Balance. Their annual sales are around 200 billion KRW. At the time of acquisition, the companies were valued at approximately 720 billion KRW and were transacted at 780 billion KRW. The global sneaker market is growing at an average annual rate of 10%. In particular, Dongjin Textile holds a 45% share of the global sneaker market. It has maintained a cooperative relationship with Nike, which is expanding its market share, for over 30 years. Recently, the trend of using textiles rather than synthetic leather in various types of sneakers is also a positive factor. Nike's stock price, which recently announced results exceeding expectations, rose more than 13%, and stocks of Lululemon and Under Armour also rose in tandem.

▶Weakness=The decline in performance of offline retail consumer goods companies like Homeplus is a painful point. Accordingly, after acquiring Homeplus, MBK has been pursuing 'Sales and Leaseback (S&LB)' of stores to improve cash liquidity. A significant portion of the proceeds from asset sales was used to repay acquisition financing. Since 2020, MBK has conducted S&LB for the Siwha and Gumi stores. The Ansan, Daejeon Dunsan, Daegu, Daejeon Tampang, Busan Gaya, and Dongdaejeon stores were sold. This year, the Busan Haeundae and Gwangju Gaerim stores were also sold using the same method. The strategy is to significantly reduce acquisition financing through asset lightening while securing operating funds. The balance of acquisition financing, which initially reached 4.3 trillion KRW, has been reduced to less than 1 trillion KRW.

▶Opportunities=MBK is currently in the process of selling Lotte Card. Although the recent preliminary bidding lost some momentum as Woori Bank, KakaoBank, and Toss Bank withdrew, it remains an attractive asset. Lotte Card's operating profit has tripled over the past three years. It surpassed Hyundai Card to rank 4th in net income among the seven specialized credit card companies. Golfzon County, preparing for an IPO, is also attracting attention due to the expansion of the golfing population. Operating 18 golf courses nationwide, Golfzon County is expected to continue steady growth amid limited golf course supply. MBK is actively expanding its business in the data e-commerce sector through Connect Wave (Korea Center). By merging price comparison site Danawa and Korea Center, it has secured the largest e-commerce data in Korea. MBK has also taken the lead in the market by successfully acquiring Medit, the number one digital dental company. The digital dental market, including oral scanners, is still in its early stages, with global market penetration rates of only 10-20%. It is a field with significant growth potential.

▶Threats=MBK holds a 40% stake in BHC, which has been engaged in legal disputes with competitor BBQ for several years. The escalation from civil to criminal cases has damaged the brand image. Along with the Fair Trade Commission's strengthened regulations on franchise businesses and the reduction in delivery demand due to the with-COVID policy, the boom of the past two years is coming to an end. It is time to readjust sales and operating profits. In particular, criticism that private equity funds infringe on small local businesses has intensified, leading to calls for measures to promote coexistence with franchisees.

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