[Edaily Marketin, Reporter Song Seung-Hyeon ] How should the acquiring party respond when a company acquired for a hefty sum sees its revenue plummet immediately after the acquisition? Typically, when people think of private equity (PE) firms, they assume they would overcome such a crisis by squeezing out revenue through price cuts or workforce restructuring. However, LX Investment (LX Invest), which recently succeeded in selling a company for more than double its acquisition price, achieved “value-up” by proactively identifying risk factors before the acquisition and immediately implementing structural improvements.

The Semiconductor Cycle: Strengths in Boom Times Become Weaknesses in Downturns

According to the investment banking (IB) industry on the 12th, LX Invest formed a consortium with M Capital (now MG Capital) in 2022 to acquire 100% of SSP’s shares for approximately 180 billion won. It was a 191.2 billion won project fund in which MG Saemaul Credit Union participated as a major limited partner (LP). On the 31st of last month, the deal was finalized by transferring the entire stake to Keystone Partners, another private equity firm. The sale price was 360 billion won. Adding the 57.02 billion won in dividends received during the holding period, the total recovery amounted to 417 billion won—2.3 times the principal.

SSP, established in 1996, is an unlisted equipment manufacturer with a factory in Yeonsu-gu, Incheon. Its core product is ball-mounting equipment used to attach micro solder balls to semiconductor packages; a significant number of major semiconductor companies that have adopted this process use the company’s equipment. It also manufactures electromagnetic shielding equipment and test handlers. Most of its revenue comes from overseas. Even a significant portion of the sales volume recorded as domestic revenue on the books is structured to be exported overseas via the company’s domestic subsidiary.

SSP, a quintessential “strong small and medium-sized enterprise,” found itself in crisis immediately after being acquired by LX Invega. Shortly after the acquisition, the semiconductor cycle began to wind down, prompting upstream semiconductor companies to simultaneously halt investments in new production lines, which led to a complete halt in orders for back-end equipment. In fact, revenue, which stood at 59.72 billion won in 2022, fell by 39.5% to 36.16 billion won the following year.

During the boom, the company’s reliance on a few top global outsourced semiconductor assembly and test (OSAT) firms—which had been one of its strengths—became its greatest weakness once the boom ended. Above all, the deteriorating business conditions at Intel, one of its largest customers, proved to be a fatal blow. The company’s reliance on an “inbound sales” approach—simply waiting for orders based on its popular equipment—also became a weakness during this period. Sales staff operated based on their individual expertise, and there was no organized process for developing new business relationships.

The answer was already there… shifting from a “wait-and-see” sales approach to a proactive, “go-out-and-sell” approach

LX Inve was also aware of this issue even before the acquisition. During the due diligence phase, it identified customer concentration and the lack of a sales framework as potential risks, and it had already established a post-merger integration (PMI) plan before the deal closed. The first move was personnel-related. However, this was not a workforce restructuring aimed at offsetting the decline in revenue. CEO Ju Hee-jong, who had joined the company in the early 2000s and had long overseen the sales division, was promoted to CEO. In contrast, not a single other executive was replaced. This was a strategic decision to maintain control on the ground amid a change in major shareholders. The only position filled from outside the company was that of Chief Financial Officer (CFO).

Following CEO Ju’s appointment, the sales approach shifted to an “outbound” strategy, where the entire company focused its efforts on specific target clients. CEO Ju and the sales team personally visited clients to secure new business. EY Parthenon, a PMI consultant that had been working with LX Inve even before the acquisition, was stationed at the company for three months immediately following the takeover to help establish a sales management system. The product portfolio was also expanded from the single item—ball mounts—to include equipment for upstream and downstream processes, such as laser reflow systems. While maintaining R&D collaborations with existing major clients, the company expanded its reach to European and global firms. A prime example of this was the company’s continued collaboration with Tesla—which had announced plans to begin semiconductor production—while also devoting significant effort to research and development (R&D).

On the other hand, the company chose not to lower unit prices for short-term gains. In 2023, when revenue fell by 39%, the cost of goods sold ratio actually improved by 3.4 percentage points, from 50.5% to 47.1%. This figure would have been difficult to achieve had the company cut prices to secure volume. A key factor in maintaining these costs was the shift from outsourcing the tools used in equipment manufacturing to in-house production. Even so, the operating profit margin fell by only 1.7 percentage points to 32.6% compared to the previous year (34.3%). Given that semiconductor companies were facing widespread difficulties, the industry assesses that the company performed well while implementing structural improvements.

Since then, the company’s performance has shown steady, step-by-step growth. After hitting bottom in 2024 with revenue of 40.86 billion won and operating profit of 12.85 billion won, the company recorded revenue of 56.57 billion won and operating profit of 20.31 billion won last year. Over the course of a year, revenue increased by 38.4% and operating profit by 58.1%. The operating profit margin rose to 35.9% last year, following 32.6% in 2023 and 31.5% in 2024. This marks the highest level during the holding period, surpassing the 34.3% recorded in 2022, just before the acquisition. While revenue itself still falls short of the 2022 level (59.72 billion won), operating profit matched that year’s figure (20.48 billion won). Most importantly, revenue for the first half of this year is reported to have matched last year’s total, leading to the assessment that the company has successfully improved its fundamentals.

LX Invest’s successful closing of this deal is the result of proactively identifying the causes of the slump that followed the end of the semiconductor boom and steadfastly implementing the necessary measures to boost the company’s value.