Local private equity in South Korea rises against foreign competition

By Rizza Sta. Ana

Dec 26, 2013 01:26 AM EST

A Financial Times report said local private equity funds in South Korea were seen flourishing as compared to its foreign counterparts, nearly ten years after the first domestic fund was set up. The report said the emergence of local funds in the domestic buyout market was attributed to the national government's support in the efforts of pushing local funds as an integral source of financing in the corporate world.

MBK Partners, Vogo Fund and other local buyout group leaders were said to have won majority of the deals in South Korea in the past few years as the influence of foreign rivals have dwindled. Both funds were established in 2005, said FT.

According to MergerMarket, private equity firms in South Korea have completed a record 40 deals worth $7.1 billion. The report noted that the figure represented around a quarter of the merger and acquisition activity in South Korea worth $31.3 billion. Moreover, domestic private equity group transactions increased 13% from last year to $6.1 billion.

The Financial Services Commission said the private equity industry accelerated rapidly due to the South Korean government's introduction of regulations meant to foster the creation of domestic buyout funds. The commission also said that as of the moment, Korea is home to around 20 private equity firms with around KRW42.3 trillion or $39 billion.

The report said South Korea attempted to accelerate private equity investment further by loosening its regulations further. FT said in its report that the national government had dropped the government clearance requirement in new buyout funds and the ban on real estate, stocks, and derivatives investments.

Korea Capital Market Institute researcher Park Yong-rin told FT, "Local private equity funds are leading the M&A market as strategic investors remain on the sidelines due to the uncertain economic outlook while foreign funds are looking at faster-growing neighbors such as China for more profitable, bigger deals."

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