South Korean private equity buyouts bounce back from Q3 2016 dip

PE funds establish themselves within the emerging South Korean market to take advantage of local growth opportunities.

Private equity buyouts in South Korea reached their highest first quarter valuation in more than a decade, with US$3.47 billion spent across 12 transactions. This figure represents a 31% value increase compared to the same period in 2016 (US$2.65 billion, 13 transactions), and a strong recovery from a discouraging US$0.87 billion value in 2016’s third quarter.

Domestic deals continue to dominate the PE landscape (77% in 2016), with firms such as MBK Partners, Hahn & Company and IMM establishing themselves as front runners within the South Korean PE market. MBK has already conducted the highest-valued deal of the year so far, agreeing to purchase DaeSung Industrial Gases from its shareholders for US$1.7 billion.

Interest from international PE funds has also grown in recent years, with 13 buyout transactions totalling US$1.16 billion announced in 2016 marking the second highest annual deal count on record following 2104 (14).

The US was the most active cross-border bidder in 2016, having invested in a total of six deals worth US$477 million. The highest valued transaction was the US$325 million buyout of a 60.39% stake in South Korean cosmetics maker Carver Korea by a consortium led by Bain Capital and Goldman Sachs.

A 2016 White & Case report South Korea: Building for the future highlighted how South Korea’s digital infrastructure and skilled workforce has proved a draw for global investors. "Equity markets are very dynamic in South Korea,” the report observes. “South Korea is also an investment-friendly environment for private equity, and several global funds are investing here.”

As South Korea emerges as a viable PE market, deals are likely to accelerate in the coming year. Multiple deals in the pipeline, such as the upcoming sales of Sungshin Cement, EBest I&S and Dongbu Express, will provide ample opportunities for international and local funds alike to invest their cash.

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