M&A Market Halved, Private Equity-Owned Assets Flood Market Since Early This Year

Shrinking from 134 trillion in 2021 to 78 trillion in 2022
Over 100 M&A deals closed in Q1, deal size more than doubled
Assets flood market amid fund maturities and regulatory push for M&A 활성화

Portfolio assets held by private equity funds (PEFs) are increasingly being released into the market. Typically, private equity funds attempt to sell their acquisitions around the five-year mark, and as fund maturities approach, the volume of assets coming to market has also increased. There is also growing optimism that the overall market environment will improve, with interest rates falling. Additionally, the financial authorities’ plans to remove obstacles hindering corporate mergers and acquisitions (M&A) and to improve related regulations are creating a favorable environment for M&A activity.

Over 100 M&A Deals in Q1... More Assets Expected in Q2

According to the investment banking (IB) industry on the 30th, the size of the domestic M&A market last year was about 78.7 trillion won, which is roughly half of the 134.1 trillion won recorded the year before. Considering that the market had shown an upward trend over the past decade, this represents a significant contraction.

However, the situation reversed in the first quarter of this year. More than 100 M&A deals were completed, and the transaction volume more than doubled compared to the fourth quarter of last year. Private equity funds played a particularly prominent role. In the second quarter, fund-driven assets are also flooding the market.

MBK Partners has put up for sale Golfzon County, the largest golf course operator in Korea. Instead of an initial public offering (IPO), they plan to recover their investment through a sale. The expected sale price is around 2 trillion won. Golfzon County operates 18 golf courses nationwide and is the number one operator in Korea. MBK Partners secured a 50% stake by investing 114 billion won when Golfzon County was established in 2018. They subsequently participated in four rights offerings, investing a total of 288 billion won. Five years ago, as membership golf courses were being listed for sale due to management difficulties, MBK Partners acquired them at low prices, expanding the scale. An IB industry insider said, "Golf courses were once priced at a premium, but due to the impact of high interest rates, the resumption of overseas travel, and concerns about an economic downturn, assets are coming to market."

MBK also listed Lotte Card, which it acquired in 2019 for 1.381 trillion won, as a potential sale candidate. Last year, they selected JP Morgan as the lead manager and explored a sale. During the preliminary bidding process, KB Financial Group and Naver reportedly expressed non-binding acquisition interests.

Hahn & Company is also putting various assets on the market. After acquiring a controlling stake in Hanon Systems for 2.75 trillion won in 2015, they currently hold 50.5% of the company’s shares. With the fund’s maturity approaching and co-investor Hankook Tire & Technology showing strong intent to sell, there is a high possibility of a sale this year. They are also negotiating sales of controlling stakes in SK Shipping’s tanker business, used car platform K Car, SK Ecoprime, Ssangyong Remicon, and several other companies.

IMM PE is pushing for the sale of cosmetics brand Able C&C, acquired in 2017. Hyundai LNG Shipping, acquired in 2014, is progressing smoothly with HMM expressing acquisition interest. IMM PE is also pursuing the sale of a 30% stake in Air First, attracting interest from KKR, Brookfield, BlackRock, and CVC Capital.

JKL Partners is preparing to sell Lotte Non-Life Insurance, while Glenwood PE’s PI Advanced Materials, Morgan Stanley PE’s Jeonju Paper, Stick Investment’s Daekyung O&T, KL & Partners’ Mom’s Touch, Affinity Equity Partners’ Burger King, Anchor PE’s Meta M, and Apalma Capital’s Mad for Garlic are also in the process of sales. A Burger King representative said, "Rather than rushing to sell immediately, we are pursuing a strategy to introduce and grow sub-brands to increase the overall valuation."

PEFs Launch Record-Breaking Fundraising... Downturn Seen as Opportunity

Since the end of last year, MBK Partners, which has made large-scale investments in Medit, Osstem Implant, Nexflex, and others, is expected to launch its sixth fund aiming to raise over 8 trillion won within the year. Hahn & Company is pushing to raise its fourth fund, the largest ever, targeting around 4 trillion won this year. Moving away from primarily attracting overseas limited partners (LPs), they are also seeking commitments from domestic institutions such as the National Pension Service. IMM PE completed the first closing of Rose Gold 5 (2.6 trillion won) last year and is smoothly progressing toward multiple closings. IMM Investment is actively working on raising Petra 9 (2 trillion won). Stick Investment, VIG Partners, and Skylake Equity Partners have also launched new funds worth trillions of won.

PEFs were once criticized as "corporate raiders," but recently, leveraging their capital and information advantages, they have played a key role in rescuing companies struggling after the COVID-19 pandemic. The financial authorities’ intention to ease regulations on PEFs to activate M&A is aimed at generating positive effects such as corporate restructuring and job creation.

During the COVID-19 pandemic, many companies facing limits were acquired by PEFs. In 2020, Hahn & Company acquired Korean Air’s profitable in-flight meal and sales division for 990.6 billion won. In 2021, JKL Partners invested about 80 billion won in T’way Air and added 21.7 billion won in 2022. In January this year, VIG Partners purchased all shares of Eastar Jet for 110 billion won.