Global buyout firms have swept up most of South Korea’s large-scale mergers and acquisitions this year, filling the vacuum left by domestic private equity groups reeling from political and public backlash over the so-called “Homeplus incident.”
Industry officials warn that if the government pushes ahead with tougher rules on private equity, the country could see a repeat of the “Lone Star incident” decades ago, when foreign funds profited from regulatory paralysis and market dislocation.
The Lone Star incident refers to a highly controversial episode in Korea’s financial history in the early 2000s, when the US private equity firm Lone Star Funds acquired, and later sold, a major Korean bank at a huge profit, amid accusations that the fund exploited regulatory weakness and market turmoil in the aftermath of the Asian financial crisis.
AFFINITY, KKR, EQT VS GLENWOOD PE
According to data compiled by The Korea Economic Daily on Thursday, foreign private equity funds (PEFs) accounted for more than half of major buyout deals involving controlling stakes so far this year.
Of the four deals exceeding 1 trillion won ($681 million) that reached definitive agreements, three went to global funds.
They are, Hong Kong-based investment firm Affinity Equity Partners’ 1.78 trillion won acquisition of Lotte Rental Co., Korea’s No. 1 car rental and leasing company; US private equity firm KKR & Co. Inc.’s 1.78 trillion won deal of SK Ecoplant Co., the waste management and water treatment unit of SK Group; and Swedish PEF EQT Partners’ 1.32 trillion won acquisition of Douzone Bizon Co., Korea’s leading homegrown enterprise software firm and the country’s No. 2 player in the enterprise resource planning (ERP) market.
The only 1 trillion won-plus deal led by a domestic PEF was Glenwood Private Equity Co.’s 1.4 trillion won buyout of LG Chem Ltd.’s water filter business, the world’s second-largest producer of reverse osmosis membranes.
MID-CAP TRANSACTIONS
The trend extended to mid-cap transactions valued at between 500 billion won and 1 trillion won.
KKR acquired cosmetics packaging maker Samhwa Co. for 733 billion won, while Blackstone, the world’s largest alternative asset manager, and EQT snapped up Korea’s largest premium hair salon chain Juno Hair and Remember & Company, the operator of a fast-growing Korean career networking platform Remember, respectively, for around 500 billion won each.
Among local players, only VIG Partners managed a comparable deal, a 700 billion won acquisition of biotech firm ViOL.
REVERSED TRENDS
The latest moves mark a stark reversal from recent years.
Between 2023 and 2024, domestic private equity firms dominated some 70% of large-scale M&A activity, but their share has plunged to just 24.2% this year.
Foreign funds, which previously accounted for around 30%, now make up more than three-quarters of the market.
Although Korean PEFs remain involved in several ongoing deals, including those for waste treatment firm Korea Environment Technology Co. (Koentec) and SK Siltron Co., the world’s third-largest semiconductor wafer producer, industry officials said that reclaiming momentum will be difficult.
POLITICS IN BUSINESS
Industry watchers point to the political storm surrounding the controversial sale of MBK Partners-owned Homeplus, a leading hypermarket chain, as the main reason for the retrenchment.
Analysts said mounting criticism from lawmakers, intensified scrutiny from regulators and angry public hearings on the way PEFs are operated have chilled local investor sentiment.
“These days, you never know when a comment from a union or local politician could trigger an investigation,” said a Korean PEF executive. “It feels like walking on thin ice.”
Foreign funds, by contrast, remain largely insulated from domestic politics and are unburdened by calls for social responsibility.
Their freedom from the public spotlight has allowed them to move quickly on deals that local rivals now approach with caution.
Analysts warn that if political rhetoric hardens into regulation, Korea risks driving away its homegrown investment capital while ceding control of key corporate assets to foreign investors – a scenario that could rekindle memories of the Lone Star controversy.
