South Korea deal values plummet 30%

A dearth of mega deals in 2016 is the root cause of declining deal value, according to data from South Korea’s Financial Supervisory Services.

The total value of private equity-backed transactions in South Korea shrank by 30.5 percentage points in 2016 due to a lack of mega buyout deals, South Korea’s Financial Supervisory Services said on Tuesday.

Domestic private equity firms invested a total of KRW 8.9 trillion ($7.8 billion; €7.2 billion) last year compared with deals worth KRW 12.8 trillion in 2015. In addition, the aggregate amount invested in 2016 was almost the same as the three-year average investment of KRW 9 trillion.

The biggest deal in 2015 was MBK Partners’ $6.4 billion acquisition of Homeplus, the Korean business of UK-based retailer Tesco, while in 2016 one the largest deals was MBK's nearly $1 billion acquisition of tools maker Doosan.

Among private equity deals last year include VIG Partner’s KRW 65 billion investment in funeral service provider Good Sangjo and its KRW 27 billion purchase of parking management company Hiparking; IMM Private Equity’s KRW 55 billion investment in online cartoon platform Lezhin Entertainment; and Affinity Equity Partners’ KRW 210 billion investment in Burger King Korea.

Private equity deals in 2016 were also largely focused on domestic companies, representing 86.5 percent of overall transactions.

The FSS recorded 383 private equity funds in Korea at the end of 2016, 3.5 times greater than the number in 2009 when the Financial Investment Services and Capital Markets Act took effect.

In the seven-year period, the total committed capital increased from KRW 20 trillion in 2009 to KRW 62.2 trillion in 2016. Meanwhile, the invested capital also grew from KRW 12.8 trillion to KRW 43.6 trillion between 2009 and 2016.

The FSS expects South Korea’s private equity industry to grow further as institutional investors increase their exposure to alternative investment and the M&A market continues to expand.