Korea, Japan lead Asia's buyout markets: MBK Partners

South Korea and Japan are the two most important markets for buyouts in Asia, and China is still a significant private market with potential for mid- to long-term growth, said North Asia-focused private equity firm MBK Partners co-founder and Partner Michael ByungJu Kim in an annual letter to its shareholders last week.

While the liquidity cycle is expected to normalize this year, MBK will continue to focus on Korea, Japan and China and won’t be pulled to India despite the South Asian country’s attractiveness in venture and growth capital, said Kim, a former president of Carlyle Asia Partners.  

The PE firm deployed $3.6 billion in investments last year, including co-investments with limited partners (LPs). MBK created $3.8 billion of value in buyouts and $295 million in special situations, with more than $400 million realized last year, according to the letter.

The asset management firm made $412 million in distributions in 2023, mostly through partial sales and leveraged recapitalization. It was a down year in distributions for the firm as the overall private market’s deal and exit values dropped with rising financing costs, the co-founder said.

Korea is a market that “punches above its weight” as the country has the 10th-largest gross domestic product (GDP) in the world but ranks fifth in the number of large caps with the PE penetration equivalent to 0.8% of the GDP, the highest in Asia, Kim said.

While family-owned conglomerates have created strong deal flow, MBK recently sees deal opportunities set to increase with an expanding volume of sales of non-chaebol companies, Kim noted. Korean companies remain cheap, MBK’s investments in the market were made at a 25% discount on average to global comparables, he added.

In Korea, MBK invested more than 3 trillion won ($2.2 billion) to acquire dental scanner maker Medit Corp., dental implant manufacturer Osstem Implant Co., smartphone component maker Nexflex Co. via a buyout strategy and the world's fifth-largest battery maker SK On Co. through a special situations fund last year.

In Japan, the private market boom is driven by the country’s Corporate Governance Code and shareholder activism, Kim noted. Japan has emerged as the second most active market for shareholder activism in the world, and such an environment gives the PE house more opportunity to bail out management, according to the letter.
 
Last year, MBK invested $236 million to acquire Japanese nursing care services provider Soyokaze Co., formerly Unimat Retirement Community, and living-support services provider Hitowa Holdings Co. On the special situations side, the PE firm invested an additional $41.2 million in secured loans of auto parts maker Marelli Holdings Co. and injected $93 million in Japan Best Rescue System Co., a daily life-related trouble-solving services company.

On an absolute returns basis, the aggregate marks for MBK’s five active funds, comprised of three buyouts and two special situations funds, stood at a multiple of capital (MOC) of 1.9x and internal rate of return (IRR) of 20.5% as of the end of 2023.

The PE firm, one of the largest North Asian PE houses, had more than $30 billion in capital under management as of the end of 2023. Its letter to shareholders is sent to about 100 global investors such as the Singaporean sovereign wealth fund GIC, the Canada Pension Plan Investment Board (CPPIB) and Korea’s National Pension Service (NPS).

Write to Ji-Eun Ha at hazzys@hankyung.com


Jihyun Kim edited this article.