A Growth Ladder Fund will raise 440 billion won (US$412 million) of new funds, including M&A funds, to support the growth of small and medium sized companies during the latter half of the year.
The funds are to be injected, through M&As, into areas such as Intellectual Property (IP) and KONEX activation, where private funds are scarce.
On March 27, the Financial Services Committee and Growth Ladder Fund Committee revealed their plans to form three funds during the latter half of the year, in order to support the fund collection and growth of small and medium sized companies. This is to be the latter’s first operation this year.
The Growth Ladder Committee is looking to create about five funds worth a minimum of 440 billion won (US$412 million) by investing a total of 225 billion won (US$211 million). Individual sub-funds include a growth strategy M&A fund (300 billion won, US$281 million), an IP fund (100 billion won, US$94 million), and a KONEX activating fund (40 billion won, US$37 million).
The operation this time focuses on supporting the growth of small and medium sized companies through M&As. With this purpose in mind, the Growth Ladder Fund is planning to boost the participation of Strategic Investors and Limited Partnership investors by allowing a post-matching method for M&A funds.
The decision is based on the fact that, despite a current stable infusion of the market, the M&A market is mostly comprised of project funds with predetermined target companies instead of blind funds that allow active hunting for target companies.
A blind fund refers to a method of raising a fund without a predetermined target company, and then investing it after finding an ideal investment opportunity. The fund will only limit itself to small and medium sized companies to expand their opportunities for M&As.
For example, the Growth Ladder Fund and a general partner will form an M&A fund first, and when there is a strategic investor that wants an M&A for its growth impetus, the general partner will additionally secure a private limited partner investor and establish a special purpose company.
It will infuse funds more aggressively into IP funds and KONEX activation funds. Neither IP finance nor the KONEX market can guarantee profitability, so the Growth Ladder Fund will take the initial burden of losses through measures such as posterior investment or majority investment in association formation funds.