Private Monies
MBK Partners, one of the largest PEFs in Korea, was selected as the preferred bidder for Homeplus, beating global leading PEFs such as KKR and Carlyle. Homeplus is the second-largest SSM, and MBK Partners is looking to take it over at an investment of close to 8 trillion won (US$6.7 billion) so that the recent boom of private equity fund (PEF) led large-scale M&As continues.
The concept of a PEF may still be unfamiliar to some people. However, a large number of well-known brands are owned by PEFs, ranging from Burger King and Hollys Coffee to Coway and Esquire. Such a vitality of PEFs in Korea, the first one of which appeared just a decade ago, is because pension funds and institutional investors are opting for them one after another as a way of coping with low growth and low interest rates. Last year, PEFs attracted no less than 9.8 trillion won (US$8.2 billion), to reach a new high.
Nowadays, those PEFs are cementing their presence in the M&A market as well by not settling for their role as financial investors, but covering even buyout deals as strategic investors. It has been said that MBK Partners was selected as the preferred bidder this time because of its non-price merits and financing capabilities. “MBK Partners impressed Tesco, the owner of Homeplus, by promising that it would shoulder every issue regarding the company, including opposition from a trade union and the recent personal information leakage,” said an industry insider.
IMM Private Equity, in the meantime, is planning to complete the acquisition of Taihan Electric Wire by this Oct. The former’s idea is to seek after business stabilization rather than short-term profits for the second-largest electric wire manufacturer in Korea that has suffered from chronic financial problems. Last year, the Vogo Fund succeeded in bringing 12.1 billion won (US$10.2 million) in operating profits to Burger King, up 38 percent from a year ago after having acquired the loss-making fast food chain in 2012.
Nevertheless, some people still focus more on the negative side of PEFs, in that not a few of them have collided with trade unions during the restructuring that followed the takeover, and some of them appear to still be resorting to eat-and-run, as in the earlier case of Lone Star and Korea Exchange Bank. Their business capabilities and stability are often called into question, too. MBK Partners recently put Coway on the market just three years after acquisition. “In an economic recession, large enterprises tend to hold cash rather than make investments for M&A purposes, but Korean PEFs act the other way around,” an investment banking expert pointed out, continuing, “Then, the winner’s curse is likely to follow even in the event of a successful takeover.”