Korean PEFs turn to holding company structure for bigger growth opportunities

More South Korean private equity firms are expected to adopt holding company structure to make it easier to advance into new business areas under relaxed regulations.

IMM Private Equity recently placed IMM Private Equity and IMM Credit Solution, which it launched in October 2021 for investment in minority shares and debt products, under a holding company. The change would allow more independence in the company’s operation in buyout investment through IMM Private Equity, and other new areas, especially minority stake investment, run by IMM Credit Solution, according to industry experts.

The Seoul-based PEF also made Operation Group as part of IMM Private Equity, instead of leaving it as a subsidiary. The merger has removed the risk of the PEF being categorized as a large business group, which is subject to the Financial Trade Commission’s tighter monitoring.

Korea’s other homegrown PEFs are also shifting to holding company structure.

Keystone Partners set up Keystone Holdings in early 2021 and recently created Keystone Credit under the holding company.

Stonebridge Capital turned into a holding company in July last year and made Stonebridge Private Equity, Stonebridge Ventures, and Stonebridge Asset Management as wholly-owned subsidiaries.

Stic Investments already turned into a holding company structure a few years ago. The PEF made a backdoor listing on the Kospi last year and its market capitalization is estimated at 500 billion won ($419 million).

Market watchers anticipate the PEFs that recently turned into holding company structure to follow Stic Investments’ step of listing the holding company in the stock market.

Public listing is the best option for the country’s first-generation PEF to have their worth fairly recognized and cash out their investment when their founders retire from the market, said an investment banking industry official.

Global asset managers have also opted for IPOs to grow their business. Blackstone went public in 2007, KKR in 2010, and Carlyle Group in 2012, after the global asset management giants expanded out their businesses to various areas.

In Korea, industry watchers see MBK Partners as the next PEF to make a big debut in the local stock market.

MBK Partners has not yet transformed into a holding company but it has been already running separate buyout and special situation teams. The PEF recently sold its 13 percent stake to Dyal Capital Partners, a New York-based capital market company that specializes in acquiring PEF’s shares and making exit after initial public offering.

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