South Korean hotspot

Despite rising political tensions, South Korea remains a draw for Asia’s private equity firms.

While escalating tension between North and South Korea has kept the two countries in the mainstream news headlines this month, South Korea has also been at the forefront of consciousness for the private equity industry.

The opening of a South Korean office by global alternatives investor Partners Group was one story which grabbed headlines in November. The choice of Seoul as the location for the Zug-headquartered firm’s fifth Asian office may seem unusual, given the firm has yet to establish a formal presence in India. But when you consider it in the light of the relationship the firm has built with Korea Investment Corporation (KIC), the $30 billion sovereign wealth fund created by Korea’s government five years ago, it is less surprising. KIC has so far awarded the firm two discretionary mandates, one each to manage its private equity secondaries and private real estate investments in July 2009 and July this year respectively.

Interestingly, however, in a company statement following the official opening of its Seoul office in November, Partners Group said a principal aim of the new base was to better target and invest directly in Korean companies. Alex Cho, newly appointed head of Korea and senior vice president at the firm, told PEI that the firm would pay special attention to sourcing primarily top-tier growth, buyout and expansion type deals in the country’s manufacturing, retail and greentech sectors.

Seoul: sparking interest

Another strong believer in the Korean investment story is Scott Hahn, the former Korea country head, managing director and chief investment officer of Morgan Stanley Private Equity Asia (MSPEA).

Seoul-based Hahn, who left MSPEA in May this year, is currently raising an independent South Korea-focused private equity fund with a target of $750 million, say sources. Singaporean sovereign wealth fund Temasek Holdings has signed up as a cornerstone investor to the fund, committing $250 million, according to one industry insider.

Although buyout opportunities in Korea might have been sporadic, it has proved a profitable hunting ground for many of Asia’s pan-regional buyout funds over the years, not least of all MSPEA, which under Hahn’s stewardship invested in seven deals there.

Other firms to have found consistent success include Hong Kong-based Unitas Capital and Affinity Equity Partners, both of which have achieved strong returns from multiple deals in the country.

In 2009 the country played host to Asia’s largest private equity deal: the KKR-led $1.8 billion buyout of Oriental Brewery from Anheuser-Busch.