Chairman Byungjoo Kim of MBK Partners Sends 2024 Annual Letter to Domestic and International LPs
MBK Partners Makes Aggressive Investments Where Healthcare Meets Tech
"When compared to global peer companies, investments in Korean companies are conducted at an average discount of 25%. Korea is a market with stronger influence and investment value than it appears on the surface."
Kim Byung-joo, Chairman of MBK Partners, stated in the 2024 annual letter sent to major domestic and international institutional investors (LPs) on the 1st, "The Korea discount phenomenon (undervaluation of the Korean stock market) has spread to the private equity market," adding, "Korean companies are still undervalued." This encourages domestic and foreign investors to seek opportunities for generating investment returns from undervalued Korean companies.
The Asian Buyout Market is Led by Korea and Japan
Chairman Kim said, "The industrial structure centered on large conglomerates (chaebols) was also the background for the solid growth of the private equity (PE) market," and added, "There has been a consistent flow of numerous deals involving the strategic sale of non-core assets of chaebol companies or liquidity needs." He further noted, "MBK Partners has conducted nine deals related to eight chaebol groups."
He mentioned that diversification in deal sourcing is being observed, which is a sign of a maturing private equity market. As the number of sales of companies that are large in size but not part of large corporate groups due to founder succession issues gradually increases, opportunities in the mergers and acquisitions (M&A) market are expanding.
He stated that the Korean government’s policy support is opening the way for local managers like MBK Partners to solidify their market leadership.
He also analyzed the boom in the Japanese PE market. Chairman Kim described the Japanese private equity market as "the world’s third-largest economy, with over 700 mid-cap companies (second in the world), a diverse and excellent pool of management talent, a transparent regulatory system and reliable financial disclosure standards, and above all, a 'lenders’ paradise' where acquisition financing can be secured at the lowest cost globally."
He said, "The recent PE boom was triggered by the Japanese Corporate Governance Code and the emergence of shareholder activism accompanied by disclosures," and judged that "corporate sales and carve-outs have led to rationalization of affiliate portfolios."
Furthermore, he analyzed, "Japan is now the second most active market for shareholder activism worldwide, and shareholder activism greatly increases opportunities to become a 'white knight' rescuing management," adding, "Being a white knight for management provides very useful opportunities to access internal information during due diligence."
Regarding the Chinese market, he forecasted that although volatility remains high, the East Asian market currently led by Korea and Japan will see a return of a China-led market in the mid to long term.
Chairman Kim explained, "The Chinese government is gradually implementing reforms in real estate, financial services, and the private sector, pursuing active and cautious fiscal and monetary policy programs, but the stock market has yet to recover, and PE deal flow has decreased."
He mentioned, "Many GPs (general partners) have reduced their exposure to China, but this does not mean the end of the era led by China," noting, "China’s economy is enormous, with nearly one billion consumers."
He continued, "China is going through a 'growing pains' phase in its political and economic development process spanning a generation," and said, "MBK Partners views the Chinese market from a mid- to long-term perspective."
MBK Partners Invests Where Healthcare and Tech Meet
Last year, MBK Partners actively made new investments. Including co-investments, they deployed $3.6 billion. They acquired controlling stakes in Medit and Osstem Implant, and invested in SK On’s redeemable convertible preferred shares. In Japan, they invested in Soyokaze, Hitowa, and Marelli Holdings. They also invested in JBRS (Japan Best Rescue Systems), the largest building management company in Japan.
Chairman Kim said, "Thematically, MBK Partners wants to focus on the converging areas of healthcare and tech, especially sectors directly connected to consumers," hinting, "Medit and Osstem Implant are companies that fit exactly at this intersection."
Meanwhile, the enterprise value of MBK Partners’ buyout fund portfolio companies increased by $3.75 billion, and the enterprise value of special situations fund portfolio companies also rose by $295 million. Despite a weak investment exit market, MBK Partners completed over $400 million in investment exits. The buyout 6 fund, which began fundraising in earnest in the fall of 2023, completed its first close at $3.5 billion.
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