[Market In] Changing M&A Structures… Joint Acquisitions and Shared Roles
A Series of Joint Acquisitions by FI and SI… Separation of Shareholdings and Management Roles
Strengthening Value-Up Initiatives Through Division of Roles and Exploring Exit Strategies
[Edaily Marketin Reporter Soyoung Park ] In the mergers and acquisitions (M&A) market, there is a growing trend of financial investors (FIs) participating in deals alongside strategic investors (SIs). While they collaborate on the transaction, a structure has emerged in which they divide roles—such as equity ownership and management—after the deal closes.
The industry views this strategy as a response to the increasingly challenging exit environment. Analysts interpret it as a strategy to bring in SIs to solidify value-enhancement structures and increase the likelihood of a successful exit. Attention is now focused on whether deals in which FIs and SIs jointly acquire companies and divide their roles will become commonplace.
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According to the domestic investment banking (IB) industry on the 28th, a structure has recently emerged in M&A transactions where FIs and SIs are listed as joint investors and share the financial burden as well as operational and business responsibilities following an acquisition.
A prime example is the April Bio deal. In this transaction, a consortium comprising IMM Asset Management—an affiliate of IMM Investment—and the strategic investor (SI) TKG Huchems secured controlling interest in April Bio. Recently, April Bio completed the subscription of a third-party private placement worth approximately 340 billion won directed at the consortium. In terms of shareholding, an IMM-affiliated investment vehicle has become the largest shareholder. Under the co-investment agreement, TKG Huchem exercises actual management control, as it can appoint three of the five board members—a majority of the board.
The Kakao Games deal, which closed last month, is similar in nature. This is because a private equity (PE) firm funded by a strategic investor (SI) acted as the acquiring entity. In March, Kakao announced that it would sell a portion of its stake in Kakao Games to L Triple Investment (LAAA Invest), a special purpose company (SPC) established by Petrico Partners. With the completion of the transaction, LAAA Invest became the largest shareholder of Kakao Games. The largest shareholder of LAAA Invest is Petrico Private Equity Fund No. 6. The largest investor in this fund is LY Co., Ltd., an affiliate of Line Yahoo.
As a result of this transaction, key executives from Line Games have joined Kakao Games’ management team. Kim Tae-hwan, former vice president of Line Games, was recently appointed co-CEO of Kakao Games. Shin Kwon-ho, former chief financial officer (CFO) of Line Games, has also joined Kakao Games as its new CFO.
Keystone Private Equity (Keystone PE) partnered with the strategic investor (SI) Woongjin Free Life when acquiring the wedding venue service provider T&W Korea. For this transaction, Keystone PE established a special purpose company (SPC) called Machi Holdings, into which Woongjin Freed Life contributed capital. Freed Life has previously outlined a strategy to expand into a total life care platform. This joint acquisition provides an opportunity to broaden its scope beyond funeral services to include the wedding market.
The reason why FIs, which typically engage in standalone acquisitions or club deals, have joined forces with SIs is clear: the environment has shifted to one where exits are difficult. In fact, global consulting firm McKinsey analyzed last March that the private equity industry is experiencing delayed exits due to △high funding costs, △highly volatile stock markets, and △more stringent due diligence procedures by acquirers.
An official in the investment banking industry stated, “By collaborating with strategic investors from the early stages of an acquisition, it is possible to establish a structure that simultaneously explores value-enhancement opportunities and designs an exit strategy,” adding, “Given the current environment where exits are difficult, it appears to be the right time for this new acquisition strategy.”
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