The fast-emerging silver economy and changes in consumer behavior have given birth to theme-driven investment strategies. And South Korea is not an exception. Those aged 65 or older take up nearly 15 percent in the country, while technologies in one of the most penetrated countries in the world are reshaping the way consumers purchase goods, order food or make payments.
This potentially puts Korean assets on the radar of Adams Street Partners, an international investment house with over $40 billion assets under management, dedicated to private equities, growth capital and buyout opportunities.
“We see change as an opportunity and the shift would drive new demand that could be served by new business models, products or services,” Yar-Ping Soo, a Singapore-based partner at Adams Street told The Korea Herald in an email interview.
Soo is responsible for Adams Street’s primary investments across Asia, or indirect investments in private equities through fund of funds by working with general partners that serve as fund vehicles.
From her perspective, the change in demographics translates into a market fit for businesses such as nursing homes and pharmaceuticals -- sectors once considered niche that are increasingly poised to grow larger.
The same is true for the change of consumer behavior, especially with the advent of mobile phones. The growing mobile platform as a new market for various types of retail services has led to a $4 billion valuation of food delivery-to-micro fulfillment unicorn Woowa Brothers, operator of Baedal Minjok app, in a takeover deal announced in December.
“Moving to Korea, Delivery Hero’s (proposed) $4 billion acquisition of Woowa Brothers is a good example of how changes in consumer behavior, in this case in favor of take-out, drove a great investment,” Soo said.
The deal reflects not only changes in consumer behavior but also, perhaps, the public’s changing view on foreign buyout of a Korean firm.
The changes come in sharp contrast with what it was decades ago in Korea’s capital market, where foreign private equity investors were often labeled as “eat-and-run foreign capital.” One of the highest-profile cases is US buyout fund Lone Star acquisition of commercial lender Korea Exchange Bank in 2003 and exit in 2012 with valuations jumping three times.
Controversies lingered as Lone Star was found guilty for triggering a deliberate undervaluation of the bank’s credit card arm. Lone Star, on the other hand, accused the Korean government of obstructing possible exit from the bank which led to its financial impairment. An investor-state dispute arbitration is underway.
Such hostility, however, appears to have given way to a fresh perception that mergers and acquisitions are critical means of an enterprise’s growth engine and the proper valuation of new technologies is a necessity, while homegrown private equity houses like MBK Partners, Hahn & Co., IMM Private Equity and VIG Partners are finding their footing in the Korean market.
Korea saw $13 billion worth of private equity deals concluded, about 20 percent higher than the average from 2013 to 2017, Soo said, citing data from Asian Venture Capital Journal. Asia-Pacific private equity investment in the meantime grew from $50 billion in 2013 to $170 billion in 2018.
“As such, we believe that the Korean private equity investment scene will also evolve along with the market dynamics,” she said.
Given the private equity market is still developing, the competitive intensity when it comes to carrying out buyout strategies -- buying a company’s controlling stake -- is relatively lower in Korea than the rest of the Asian market, Soo added.
“We think that Korea is a good complement as a stable buyout market to the faster growing but more volatile emerging and developing Asian markets.”
Founded in 1972, Adams Street has been setting sights on the Asia-Pacific region both as a newly emerging investment target and as a fundraising channel, including Korea. Since its presence in Asia in 1997, the Chicago-headquartered Adams Street now raises nearly one out of five funds from the APAC region as of 2018, up fourfold from 2000 according to data analytics platform Preqin. Four out of Adams Street’s 10 offices are located in key Asian cities in Beijing, Singapore, Tokyo, and most recently, Seoul.
In line with its growth in Asia, Adams Street’s AUM has doubled over the past decade.
Adams Street’s fundraising momentum has also been building in Korea, since opening a Seoul office in 2017. Korea’s shares of the APAC fundraising came to the level of 10 percent, according to Adams Street.
“Using the fundraising momentum of Korea-focused managers as a gauge, we could also see the growing appetite for Korea investments by global investors,” Soo said.
Soo joined Adams Street in 2010. She was formerly head of Asia and emerging markets at GIC Special Investments, the private equity arm of Singapore’s sovereign wealth fund.
In terms of venture investment, Soo said Adams Street, which also directly invests in startups, will maintain its focus on China and India, while exploring future possibilities in Korean venture investment as startups here develop fast, have higher quality management capabilities and enjoy increased capital supply.
“Given the developments in Korean venture landscape over the last few years, we are hopeful that we will be able to gain further exposure in the future,” she said.
“We think that technology has not only improved the quality of life through great innovations but has also produced excellent returns and will continue to do so.”
Adams Street has yet to unveil its Korean portfolio for its direct investment scheme, or plans to launch a Korea-focused fund.
By Son Ji-hyoung (email@example.com