[Edaily Marketin Song Seung-Hyeon Reporter] The sale of the domestic burger franchise Mom’s Touch is set to enter the preliminary bidding phase soon. The number of potential buyers that come forward and the number of qualified bidders (shortlist) selected are expected to be the first indicators of whether the sale will be successful.

According to investment banking (IB) industry sources on the 30th, KLN Partners and the lead underwriter, Citigroup Global Markets Securities, will conduct the preliminary bidding for Mom’s Touch this week. The asset up for sale is the 100% stake in Mom’s Touch & Company held by KLN through the special purpose company (SPC) Korea F&B Holdings. The final bidding is scheduled for November.

During the preliminary bidding, potential buyers submit their letters of intent and desired prices based on the investment memorandum (IM). The seller then narrows down the list to a shortlist based on these proposals, a process that typically takes about a week. However, if there is a clear gap between the bidders, the process can be shorter. Even if seven or eight bidders participate, the shortlist can be finalized in as little as a day if the top three or four are clearly identified. The shortlist usually consists of 2–3 candidates, or at most 4. This is because coordinating the schedule for the full due diligence process becomes difficult if there are too many candidates. Candidates on the shortlist undergo full due diligence and participate in the final bidding, after which the seller selects one of them as the preferred bidder.

Industry insiders cite the participation of overseas buyers as the key to the deal’s success. Last year, Mom’s Touch recorded consumer spending of 1.0058 trillion won across its approximately 1,490 stores nationwide, surpassing the 1 trillion won mark for the first time. Given that its domestic store network has become quite dense, analysts say further growth hinges on overseas expansion.

An industry insider stated, “The general consensus is that, as KLN pursues value creation following the acquisition, further domestic expansion will inevitably be limited,” adding, “Ultimately, overseas expansion potential is a key factor, so I suspect global private equity firms (PEFs), such as Bain Capital—which recently acquired Gongcha—might show interest.” In fact, Bain Capital acquired Gongcha last month for approximately 900 billion won.

The possibility of participation by domestic buyers also remains open. According to industry sources, a major domestic retail strategic investor (SI) reportedly expressed interest in Mom’s Touch during the preliminary due diligence phase. If domestic SIs join overseas SIs and financial investors (FIs), KLN will have greater scope to drive up the valuation through competition among bidders.

During the first sale in 2022, this competitive dynamic did not materialize. At the time, the preliminary bidding round was dominated by overseas bidders such as PAG, Goldman Sachs PIA, and the U.S. restaurant brand YUM!, but the momentum failed to carry over into the final bidding round. Ultimately, the deal fell through because the price proposed by PAG—in the 600 billion won range—fell short of the sellers’ expectations. Observers now suggest that a valuation of around 1 trillion won can only be achieved if a balanced mix of domestic and international bidders fills the shortlist of three to four candidates and competition persists through the final bidding round.

The outcome of the Mom’s Touch bidding is also expected to influence the sale of BKR, the operator of Burger King. Affinity Equity Partners has selected Deutsche Securities and Lazard Korea as joint lead managers and is proceeding with the sale of 100% of BKR’s shares. BKR’s earnings before interest, taxes, depreciation, and amortization (EBITDA) last year was 106 billion won, similar in scale to Mom’s Touch, and a valuation of up to 1 trillion won is being discussed. Since the sale is scheduled for the end of the year, the price confirmed during the Mom’s Touch final bidding round in November is highly likely to serve as a benchmark for the BKR negotiations. Given that Gongcha and Bonchon were sold at prices below initial expectations, the valuation multiple Mom’s Touch secures is expected to serve as a yardstick for gauging the price range of year-end hamburger franchise deals.