The Korea Herald


[KH Explains] Private equity firms hunt for health care buyouts

By Im Eun-byel

Published : Jan. 29, 2024 - 15:37

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Korean private equity firms are increasingly betting big on health-focused companies at home and abroad, in a bid to capitalize on the growth potential of the health care and wellness sector amid a globally aging population.

In Korea alone, where accelerated demographic change is observed due to the low birth rate, the number of people aged 65 or over was 9.73 million in 2023, about 20 percent of the total population, surging from 10 percent back in 2010.

Hahn & Co., the nation's largest private equity firm based on assets under management, is currently in talks to acquire US medical device maker Cynosure, which supplies light-based treatment systems to some 130 countries.

On Jan. 19, Cynosure announced that it agreed with Hahn & Co. on a strategic merger with Lutronic, the Korean manufacturer of aesthetic and medical lasers owned by the Korean equity firm. Hahn & Co. acquired Lutronic in June 2023 for an estimated 1 trillion won ($745 million).

Industry watchers call the latest deal a “bolt-on acquisition,” which refers to the acquisition of smaller firms in pursuit of business synergy.

“The new deal happened shortly after the previous one. Hahn & Co. is moving quickly to complete its investment portfolio,” said Kim Choong-hyeon, an analyst at Mirae Asset Securities.

With the planned acquisition, Hahn & Co. is expected to secure a bigger footing in the medical equipment market by taking a dual-track strategy, where Lutronic covers the high-end segment, while Cynosure covers the low-priced mass market.

Though details of the transaction were not disclosed, the deal is estimated to be worth about 350 billion won. The firms reportedly hope to complete the merger by the first quarter of this year.

Kim, the Mirae Asset analyst, projected additional merger and acquisition deals involving Korean medical device makers.

“High-interest rates have raised the costs of medical equipment leases by more than 10 percent on average,” Kim said, noting that “Korean firms, (with their) cheaper pricing, may have competitiveness in global sales.”

The Dental care industry is another sector of focus for private equity firms as it is expected to boom amid the reshaping demographics.

In February, MBK Partners and Unison Capital Korea joined hands to acquire Osstem Implant, the nation’s largest dental implant manufacturer, for 2.6 billion won. Just a few weeks later in March, MBK Partners announced another 2.42 trillion won purchase of Medit, a dental 3D scanner developer, possibly to seek synergy with Osstem.

“Demographics really is destiny,” MBK Partners Chairman Michael Byung-ju Kim said in a letter to investors in April.

“Within this broad theme, we recognize the salience of having the two most rapidly graying societies in the world in Japan and Korea. Hence, (this underscores) our increasing emphasis on health care, especially elderly care, in investments like Tsukui, Unimat and Osstem.”

Tsukui is a Japanese nursing home care service provider, in which MBK has invested since 2021.

Taking advantage of the growing private equity appetite for health care buyouts, larger companies are selling off their business units at lucrative prices.

In October, LG Chem sold its diagnostics business to Glenwood, an alternative investment, in a 150 billion won deal, with the company being renamed Invitros.

Its crosstown rival, SK Chemical, is also rumored to be selling its pharmaceutical business worth about 600 billion won, with several private equity firms cited as potential bidders.