A Surge of Trillion-Won Mega Deals: Will the M&A Market Awaken?

TaylorMade Valued at Over 4 Trillion Won, Preferred Bidder Selected
M&C Solution Sale Accelerates as Lock-Up Expires
SK Microworks, Aekyoon Capital, and More Up for Sale

This year, the domestic mergers and acquisitions (M&A) market is expected to see a surge of large-scale deals with sale prices exceeding 1 trillion won. As one major asset after another enters the official sales process, attention is focused on whether the long-dormant M&A market will finally begin to revive.

According to the investment banking (IB) industry on January 20, the asset most likely to be sold first this year is TaylorMade. Centroid Investment Partners, a private equity fund (PEF) management company, plans to conduct a data room due diligence for Old Tom Capital, the preferred bidder, disclosing key information such as performance results.

The transaction involves 100% of TaylorMade’s shares, and Old Tom Capital is reported to have submitted the highest bid, close to 4.4 trillion won, in the main bidding round. F&F holds the right of first refusal to acquire TaylorMade under the same conditions. Once the preferred bidder is officially selected, F&F must express its intention to acquire within two weeks. The market is watching closely to see whether F&F will acquire TaylorMade for a price in the mid-4 trillion won range.

The sale process for M&C Solution is also set to accelerate this year. This follows the expiration of the lock-up period on December 15 for the 73.78% stake in M&C Solution held by the Socius-Well to Sea Investment consortium. Additionally, the company’s market capitalization, which surged above 2 trillion won on the back of a defense industry boom, has recently stabilized at around 1.5 trillion won, providing further momentum for the sale.

Taking into account the management premium, the 73.78% stake held by the Socius-Well to Sea Investment consortium is estimated to be worth around 1.5 trillion won. Major defense industry players such as Hanwha, LIG, and Poongsan are being mentioned as potential buyers. The industry is also paying attention to whether Taekwang Group, which returned to the M&A market after 17 years, will participate.

In addition, several other assets are awaiting sale in the market. Hahn & Company, which owns SK Microworks Solutions, has selected UBS and a domestic accounting firm as sale managers and is seeking both domestic and international buyers. Global Sae-A Group is attempting to sell its paper business units, including Taelim Packaging and Jeonju Paper, as a package. EQT Partners, the largest shareholder of Aekyoon Capital, has selected UBS and Citi Global Markets Securities as sale managers and is proceeding with the sale process. All of these are large assets expected to fetch over 1 trillion won.

There are also assets that have failed to find buyers for several years. MBK Partners is pursuing a resale of Lotte Card, but the likelihood of a successful sale this year remains uncertain. MBK Partners attempted to sell Lotte Card for 3 trillion won in 2022, but the deal fell through; the company has since lowered the asking price to 2 trillion won for the 2024 sale attempt.

However, a series of recent setbacks is expected to make the sale difficult again this year. Last year, a major customer data leak occurred due to hacking, and currently, financial authorities are considering sanctions such as suspension of duties for MBK Partners in relation to the Homeplus incident. Under the Act on Corporate Governance of Financial Companies, if a controlling shareholder receives a disciplinary action of "institutional warning" or higher, or if criminal penalties for the controlling shareholder become likely during the biennial eligibility review, the controlling shareholder may lose eligibility. As a result, MBK Partners could lose its status as the largest shareholder of Lotte Card. MBK currently owns about 60% of Lotte Card through a special purpose company (SPC).

Meanwhile, opinions are divided within the industry regarding the potential revitalization of the M&A market this year. Some believe that the government’s National Growth Fund, which will inject 150 trillion won over five years, will serve as a catalyst for the market, while others point to ongoing external uncertainties as obstacles.

One PEF executive stated, "Although the National Growth Fund will not be directly used for buyouts, the signal that capital is flowing into the market is important. Institutional investors (LPs) that had no plans to invest may open their wallets in response to government policy. Compared to previous years, the M&A market is showing signs of increased activity."

There is concern, however, that MBK Partners, a major player in the PEF industry, is unable to participate actively in the M&A market due to recent crises such as the Homeplus incident. In addition, the Homeplus case has highlighted the significant social repercussions of failed B2C (business-to-consumer) investments and led to increased regulatory scrutiny, resulting in a clear aversion to B2C companies-another obstacle to M&A market revitalization.

A PEF industry insider explained, "Last year, a significant number of trillion-won deals ultimately failed to close, and MBK Partners was mentioned as a key potential buyer in all of them. Large-scale deals require major players to step up, but conglomerates still face liquidity issues and are mainly interested in emerging areas such as artificial intelligence (AI). While the M&A market itself may become more active, the conclusion of 'big deals' is a different matter."