Behind the Scenes of Naver's 2.3 Trillion Big Deal... CFO Kim Nam-seon Was There

Naver $16.5 per share vs Poshmark $20 Tug of War
Final Agreement at $17.9, M&A Expert CFO Kim Nam-sun Key Player

[Asia Economy Reporter Yuri Choi] Behind Naver's pursuit of acquiring Poshmark, the largest deal in the domestic IT industry history (2.3 trillion KRW), was a negotiation battle led by Naver's Chief Financial Officer (CFO) Namseon Kim. Starting discussions when Poshmark's corporate value was declining, Kim aimed for a fair price while expressing strong acquisition intent by raising the price above the initial offer, engaging in months-long negotiations. As a result, the acquisition price was lowered by about 100 billion KRW from Poshmark's initial bottom line of 2.4 trillion KRW. This is an achievement accomplished together by CFO Kim, who has extensive experience in large mergers and acquisitions (M&A), and the acquisition team.

From Partial Equity Investment Proposal... Due Diligence and Acquisition Discussions Lead to 2.3 Trillion KRW Bet

According to industry sources on the 21st, several price negotiations took place during Naver's acquisition of Poshmark, the No.1 fashion secondhand platform in North America. Naver expressed interest earlier this year. Seeking to expand in the U.S. market, Naver proposed a partial equity acquisition worth $125 million (approximately 167 billion KRW) in January. Since acquiring 100% equity would cost about $1.6 billion, the partial acquisition proposal opened the door for negotiations. At the same time, Poshmark, exploring entry into the Korean and Japanese markets, responded positively to Naver's partnership discussions.

The two companies conducted due diligence for investment and expanded discussions to M&A in May. Poshmark shared its financial outlook for the next 10 years and its strategy to use live commerce as a new growth engine, which led to serious acquisition price discussions. In August, Naver proposed $16.5 per share, a 38.7% premium over Poshmark's stock price, while Poshmark demanded $20 per share. Naver valued the company at $1.1 billion, and Poshmark at $1.3 billion. Including the company's cash holdings, the acquisition prices were approximately 2.1 trillion KRW and 2.4 trillion KRW respectively, leaving a gap of about 300 billion KRW.

Naver raised its offer by 6.1% to $17.5 per share, a 59.5% premium over Poshmark's stock price at the time. When Poshmark lowered its expectation to $18.5, Naver slightly increased its offer to $17.8. Poshmark then demanded $18 per share and expressed its intention to finalize the acquisition agreement by the deadline proposed by Naver. Naver made a final offer of $17.9 per share (corporate value of $1.2 billion), successfully closing the acquisition.

The acquisition price increased by 8.5% from the initial offer but maintained a premium similar to 38.7%. Along with raising the acquisition price, the termination fee for the merger was also adjusted. If Poshmark breaches the contract and the merger is terminated, it agreed to pay a fee of 2.75% of the equity, which was raised to 3.5%. This amounts to a total of $52 million (approximately 69 billion KRW).

Following Wattpad, CFO Namseon Kim Leads Poshmark Acquisition... "Outstanding Big Deal Execution"

The 'key man' leading this big deal was CFO Kim. He was involved in the acquisition structure and pricing, leading the deal alongside Naver CEO Suyeon Choi. While only the CEO of Poshmark was named in the merger contract, both CEO Choi and CFO Kim participated on Naver's side. Kim and Naver finance leader Anna Park served as co-CEOs of the SPC established for the merger.

It is analyzed that CFO Kim's strong determination was reflected in the Poshmark merger. He saw clear growth potential in Poshmark itself and many areas for synergy with Naver's services. In a recent Q3 earnings conference call, CFO Kim stated, "The net corporate value of acquiring Poshmark accounts for less than 5% of Naver's market capitalization, but its revenue contribution exceeds 5%. We expect to balance growth and profitability and achieve a turnaround (profitability) over the next 2-3 years."

CFO Kim is an M&A expert who has attracted attention since joining Naver. He worked in M&A advisory at Morgan Stanley and handled private equity (PE) investments at Macquarie Asset Management. He played a leading role when Macquarie acquired ADT Caps from SK Telecom for 2.9 trillion KRW in 2019. He was recruited as the head of Naver's finance office in 2020 and took charge of the newly established global M&A dedicated organization. The industry interprets this as Naver's declaration to proactively pursue global big deals. Indeed, CFO Kim's recruitment led to the acquisition of the Canadian web novel platform Wattpad. At that time, Naver completed the acquisition of Wattpad for 660 billion KRW, the largest deal since Naver's founding, and Kim was appointed as Naver CFO.

Given his expertise, Naver only sought assistance from the U.S. financial advisory firm LionTree for this big deal. While Poshmark appointed Goldman Sachs as its advisor, Naver entrusted an independent advisory firm not affiliated with any parent financial institution. LionTree is an advisory firm with strengths in the tech sector, having led Snap's IPO and Amazon's acquisition of MGM Studios (film production company). For legal advice, Naver appointed Kirkland & Ellis, which had assisted during the Wattpad acquisition process last year. This approach of conducting M&A without hiring large investment banks was applied again this time.

Meanwhile, Naver plans to obtain approval for the M&A agenda at Poshmark's shareholders' meeting within this year. Afterward, following reviews by U.S. regulatory authorities, the merger process is expected to be completed by April next year. Once completed, Poshmark will be incorporated as a subsidiary of Naver.