PEFs sweep 85% of Korea's major M&A deals last year, readies more this year

Private equity firms were involved in 17 out of 20 biggest South Korean M&A deals, helping to push the M&A market to a record-high last year, and are gearing up for more this year, study showed.

Their share behind big M&As rose to 85 percent last year, compared with 80 percent in 2020 and 65 percent in 2019, according to Maeil Business Newspaper’s joint study with management consulting company Bain & Company on Wednesday. The top 20 deals include minority stake trade.

MBK Partners, a Seoul-based PEF, topped the list upon selling Doosan Machine Tools to DTR Automotive for 2.5 trillion won ($2.1 billion). American global investment firm KKR ascended with its purchase of 2.4 trillion won worth of newly issued redeemable convertible shares from Korean energy firm SK E&S. Softbank Investment Advisors made the top 5 by investing 2 trillion won in travel startup Yanolja. Bain Capital sold management rights of Korea’s largest botulinum toxin maker Hugel for 1.7 trillion won.

The number of M&A deals also rose last year. A total of 368 transactions were made across Korea in 2021, up 54 percent from 2020 when Covid-19 crisis emerged to dampen the overall market activity. Even compared to 2019, the deal count is 263 more or up 40 percent.

PEFs were active on the investment front as well. Investment led by PEFs and venture capitals doubled on year to record 292 deals last year.

Led by PEFs’ active moves, Korean M&A market size reached record high of 71.5 trillion won, up 58 percent from previous high of 45.3 trillion won recorded in 2019, according to data compiled by Maeil Business Newspaper.

PEFs’ M&A market presence is expected to grow even greater this year following revision in local capital market law made in October last year enabling PEFs to expand investment into wider areas, from minor stake acquisition to loans and real estates. Trade in equity shares occupied 24 percent of last year’s total M&A deals, sharply up from previous year’s 10 percent.

Meanwhile, PEFs and VCs redeemed $21.2 billion from their investments last year. The amount is highest in seven years and more than tripled from 2020.

Stock market’s rebound coupled with retail trading frenzy led to a number of blockbuster IPOs, which included game publisher Krafton and other hot stock companies that PEFs have stakes in.

Their successful market debuts have allowed PEFs to easily cash out investments.

More deals are also appearing in the M&A market, providing PEFs with more opportunities.

PEFs with ample capital are expected to stay active in the M&A market. IMM Private Equity reportedly plans to create a blind pool of up to 3 trillion won and Stick Investment raised more than 2 trillion won for a new special fund this year.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]