Failed to Secure IBK Investment Again This Year
Conflict with F&F Over TaylorMade Sale
Declining Investor Trust Expected to Hinder Business
Private equity firm Centroid Investment Partners failed to secure a position in the Industrial Bank of Korea's (IBK) investment project again this year, following last year's setback. Ongoing disputes over the sale of golf company TaylorMade are also expected to hinder their business operations.
According to the investment banking (IB) industry on the 26th, Centroid recently failed the document screening stage in the selection process for the Innovation Growth (Growth Support) Fund entrusted management project conducted by IBK. The selected fund managers for the Innovation Growth Fund are to receive a total of 370 billion KRW in capital contributions to raise a fund worth approximately 1.2 trillion KRW.
Last year, Centroid passed the document screening stage in IBK's capital contribution project but was eliminated during the proposal evaluation phase. They also faced consecutive failures in capital contribution projects conducted by the Export-Import Bank of Korea and the Korea Technology Finance Corporation.
At that time, Centroid, established in 2015, was considered relatively inexperienced compared to competitors, with a shorter track record. Although the acquisition of TaylorMade helped expand their size, the inability to demonstrate successful exit results was also a hindrance. Despite reapplying for this year's capital contribution project, they failed to pass even the document screening stage.
Industry insiders analyze that Centroid's portfolio management issues, including conflicts with their largest limited partner (LP), F&F, over the sale of TaylorMade, are hampering their success in capital contribution projects.
Currently, Centroid has appointed JP Morgan and Jefferies as financial advisors to proceed with the sale of TaylorMade, which they acquired in 2021, and have begun related work. During this process, a side agreement with their largest LP, F&F, was revealed, causing a loss of trust from the LPs. F&F is asserting a 'prior consent right' stipulated in the side agreement and is protesting that Centroid proceeded with the sale without their approval. A management dispute between Centroid and F&F over TaylorMade cannot be ruled out.
Accordingly, even if the sale process is fully initiated, considering potential legal disputes, the transaction is expected to perform poorly. In this case, it is unlikely that the sale price desired by Centroid, in the 5 trillion KRW range, will be achieved. A Centroid representative stated, "As demonstrated by the performance after acquiring TaylorMade, Centroid has been committed to enhancing portfolio value and maximizing investor returns, and in reviewing exit strategies for TaylorMade, we will seek options that provide the best interests for all investors."
Meanwhile, following the Homeplus incident, institutional investors such as the National Pension Service are raising the standards for selecting entrusted fund managers, which is unfavorable for private equity firms. Recently, institutional investors including the National Pension Service are considering introducing a responsible investment scoring system to expand qualitative factors in the selection of entrusted fund managers.
An IB industry official said, "Centroid is weak quantitatively due to limited exit performance, and the side agreement with F&F has damaged LP trust. As stricter criteria are expected in future capital contribution projects, Centroid is likely to face difficulties."
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