CVC Capital Partners is interested in electronic commerce, healthcare and services sectors in South Korea because of their growth potential, and willing to chase minority stakes in companies with strong consumer brands, said its Korean head in a recent interview.
“Manufacturing companies, by and large, have low operating profit margins and their growth potential is limited, so they are less attractive targets for acquisitions,” Steve Lim, partner and chairman of CVC’s Korean office, told the Korea Economic Daily on March 8.
For online business companies in the country, the London-based private equity firm will take time to invest, given that a majority of them remain in the red. Instead, it is zooming in on companies in their surrounding ecosystem, including delivery service firms.
“When it comes to B2C (business-to-consumer) companies with strong consumer brands, we won’t stick to buyout. We can take a minority interest of about 30 to 50% stake,” he said.
CVC is also considering co-investment options with domestic strategic investors via a consortium, Lim added, without elaborating further.
It was his first media interview since he was installed as the head of CVC’s Korean operations in September 2015. The former managing director of JPMorgan in Korea said that he is now seriously looking at three to four investment targets out of the 90-odd cases he had reviewed in the past 16 months.
Lim stressed that his firm has been taking a long-term approach to South Korea, shrugging off concerns about the lack of acquisition deals it had sealed in the country in over a decade.
In February, CVC signed a preliminary agreement to sell KFC Korea, a fast food franchise, to a South Korean mobile payment service provider.
But both private equity firms requested a dispute resolution to the Hong Kong International Arbitration Center over the deal in January. CVC demands the acquisition, worth about 330 billion won ($285 million), be cancelled, citing the poor financial conditions of a smaller-sized delivery company Logen had absorbed in 2015. CVC claimed it had not been fully informed of the latter’s financial status by the selling side.
CVC is in the process of raising a seventh buyout fund for the target size of €12.5 billion. In 2014, it raised a €3.5 billion Asia-focused fund and a €10.9 billion Europe buyout fund.
By Soram Jung and Donghun Lee
<Edited by Yeonhee Kim>