Shinhan Venture Investment to Form Its First M&A Fund

600 Billion Won Scale ‘Shinhan M&A-ESG Investment Fund’
Securing General Corporate Funds Following the Mother Fund

[Asia Economy Reporter Kwangho Lee] Shinhan Venture Investment is set to establish a merger and acquisition (M&A) fund. While it has focused on early-stage investments by forming various venture partnerships, it plans to expand its investment scope through the new M&A fund. Attention is focused on its maiden investment and future portfolio.

According to the investment banking (IB) industry on the 29th, Shinhan Venture Investment was selected as the entrusted operator (GP) in the M&A sector for the Korea Venture Investment’s June Mother Fund ad-hoc contribution project. Shinhan Venture Investment plans to raise a fund of at least 60 billion KRW. The anchor investor (LP), the Mother Fund, will contribute 30 billion KRW, which is half of the total. The remaining amount will be filled through general corporations interested in M&A.

The fund is tentatively named ‘Shinhan M&A-ESG Investment Partnership.’ The lead fund manager will be CEO Donghyun Lee. CEO Lee graduated from Sogang University’s Department of Business Administration and has worked at Long-Term Credit Bank, Muhan Investment, and Tube Investment. He has focused on investments in general manufacturing, IT convergence, and software sectors. He has been serving as CEO since September 2020.

Although the lead fund manager is CEO Lee, a venture capitalist, the fund operation will be led by the PE Investment Headquarters. However, since various industrial sectors will be reviewed beyond manufacturing, which is a representative sector of M&A, the resources of the VC Investment Headquarters will also be actively utilized.

The total Mother Fund contribution for the M&A sector was 60 billion KRW, the largest scale. Because of this, many asset management companies threw their hats into the ring. After competition among Now IB Capital, Next G Investment & DSN Investment, Daol Private Equity, Lighthouse Combine Investment, Bokwang Investment, Aim Investment, and E& Investment, only Shinhan Venture Investment and Daol Private Equity secured the GP status.

Going forward, Shinhan Venture Investment can use the M&A fund to acquire small and venture companies or invest in mid-sized companies seeking to acquire small and venture companies.

The investment period of the fund is four years. The duration is over five years. The GP commit is about 1%. The internal rate of return (IRR) target is over 3%. Differential application of the target return rate is possible for the Mother Fund’s contribution shares, with detailed application methods to be decided during the agreement on the regulations. Performance fees are within 20% of the returns exceeding the target return rate.

Although the name is tentative, since ESG is included in the fund name, it is expected to focus on related investments. On the 16th, Shinhan Venture Investment signed a consulting contract with Sustainvest, an ESG specialized research institution, to enhance ESG investment capabilities. This was to diagnose current ESG investment capabilities and prepare ESG investment and screening standards that meet global criteria in the future.

It is noteworthy whether the fund will increase returns while fulfilling corporate social responsibility. In this process, it is expected to naturally focus on creating synergy effects with Shinhan Financial Group affiliates.