Foreign private equity fund managers accounted for 83% of mega-deals exceeding 1 trillion won (approximately $722.6 million) in South Korea’s M&A market this year. Domestic PEF managers completed zero trillion-won acquisitions.
According to ChosunBiz’s analysis of South Korean M&A transactions from January through August, foreign PEF managers secured five of six large acquisitions (83.33%) valued at over 1 trillion won. The only deal involving South Korean capital was Doosan’s (000150.KS) acquisition of SK Siltron, and no trillion-won acquisition was led by a domestic PEF manager.
The dominance of foreign PEFs is evident across individual transactions. KKR secured the SK Group renewable energy business package sale and joint venture establishment deal valued at 1.8 trillion won (approximately $1.3 billion). Carlyle Group agreed to acquire Chungho Nais, which drew attention as a sale driven by inheritance tax burdens. Swedish PEF manager EQT Partners acquired a controlling stake in Douzone Bizon for 1.32 trillion won (approximately $953.8 million) in the first half of the year. Lotte Rental, South Korea’s largest car rental company, signed a stock purchase agreement on the 11th with U.S.-based PEF Texas Pacific Group (TPG) in a deal valued at 1.3 trillion won (approximately $939.4 million).
South Korean PEF managers had previously maintained a consistent presence in large transactions. Notable examples include UCK and MBK Partners’ acquisitions of Medit and Osstem Implant, and IMM PE’s acquisition of EcoBit. However, this trend has completely halted this year.
The weak Korean won underpins foreign PEFs’ sweep of large deals. With the won-dollar exchange rate surging to 1,561.5 won (approximately $1.1) in June, foreign PEFs converting dollars to won to pay acquisition prices gained a competitive pricing advantage. While the exchange rate has recently trended downward, analysts say more time is needed before it meaningfully impacts the M&A market.
Industry sources attribute U.S. PEF manager TA Associates’ selection as preferred bidder for Daewoong Group’s regenerative medicine company CGBio partly to the weak won. TA Associates reportedly agreed to accept all conditions, including pricing that previous negotiator IMM PE had balked at.
The suspension of new acquisitions by major South Korean PEF managers has also fueled foreign activity. MBK Partners lacks capacity to pursue acquisitions in the domestic market while managing the Homeplus fallout, while Hahn & Company has chosen to focus on portfolio exits and internal restructuring.
The retreat of major institutional investors—the big players in South Korea’s capital markets—from buyout PEF commitments is another headwind. The National Pension Service has suspended new commitments to buyout PEFs, burdened by the stock market boom and mounting PEF regulatory pressures.
Foreign PEF influence is now extending into mid-sized deals. Some observers worry that domestic PEF managers, which have historically served as catalysts for corporate restructuring, could be completely displaced by foreign players. An investment banking industry source noted, “Macquarie Asset Management was recently selected as the acquirer of Hwaseung Cosmetics in a deal worth approximately 300 billion won (approximately $216.8 million), and Bain Capital previously acquired Ecomarketing. These are deal sizes that overseas PEFs wouldn’t have bothered with in the past, but the environment has changed.”