April 20, 2024

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[THE INVESTOR] More than 250 professional investors from around the world flocked to Seoul on Sept. 7 to attend the Korean edition of AVCJ Private Equity and Venture Forum, the most influential and largest gathering of private equity and venture professionals in Asia.

Diverse business opportunities were discussed during the daylong AVCJ Korea Forum, but the top agenda, among other things, was the government’s renewed push for chaebol reforms that would lead to shedding of assets by big Korean firms. 

“Restructuring will be concentrated this year and next. You will have a high chance to buy their assets,” said Kim Yi-dong, partner at KPMG Korea. 

Investors showed high expectations about purchasing lucrative assets owned by competitive firms but also urged caution.

“Big companies used to shed assets to get cash but recent deals are more strategic. They are selling assets to concentrate on certain sectors,” said T.J. Kono, partner of Unison Capital.

“We need to watch out. They are not selling their best assets,” he added.

Lee Chul-min, managing partner of VIG Partners, also stressed to focus on second- or third-tier chaebol beyond Samsung and LG.

“The chaebol have long been pressured by the nation’s regulators since the Asian financial crisis in the late 1990s. They have divested assets as much as they could. If they are selling assets, they are selling really, really non-core assets,” he said.

“The flip side is that some chaebols are now focusing on their core business and are also active in buying assets for further growth in the sector, which means more exit opportunities for private equity firms.”

Private equity professionals say they are advising their Korean partners to go global, calling Southeast Asia one of the promising markets considering the soaring popularity of K-pop among young people there.

But they also agreed the Southeast Asian market is still tricky with high risks such as political uncertainties.

“Korean equity firms need to turn their eyes to advanced markets such as the US. There are a lot of compelling and stable companies who are willing to enter the Asian market,” said James Ahn, managing director and Asian head of Clayton, Dubiller & Rice.

For foreign private equity firms, Gordon Cho, managing director of The Rohatyn Group, advised to set up a Korean office and hire local staff, saying relationship building is still a key part in doing business in Korea.

Private equity investors are thriving in Korea. According to Bloomberg, a total of 693 M&A deals were sealed in Korea in the first half of this year, with the total transaction volume surging 30 percent to US$38.8 billion from a year ago.

By Lee Ji-yoon (jylee@heraldcorp.com)