South Korea's Private Equity Market Set for Shake-up as Government Eases Regulations

Strategic Insights -

The South Korean government has announced that it will ease regulations on private equity funds, allowing local companies to set up their own funds and potentially disrupt the dominance of foreign players in the market. Starting from December 6, South Korean companies will be able to establish private equity funds, with leading players such as the Korea Development Bank, Woori Bank, and Hana Bank already taking steps to establish their own funds. The move is expected to shake up the market, which has been dominated by foreign players like Lone Star, Carlyle, and Newbridge.

Key Takeaways:

  • The South Korean government will ease regulations on private equity funds, allowing local companies to set up their own funds starting from December 6.
  • The Korea Development Bank aims to gather investors this month and set up a fund in December with about 300 billion won to 1 trillion won in capital.
  • Domestic players, including banks, securities firms, and asset management companies, are aggressively seeking to set up private equity funds, which could reward them with quick gains.
  • Foreign investors may face challenges from December, with mounting regulation and competition from domestic firms.
  • Private equity funds, however, shrugged off concerns, saying participation by locals will improve the whole private equity fund market, and thus their returns.

Statistics:

  • The Korea Development Bank aims to gather investors this month and set up a fund in December with about 300 billion won to 1 trillion won in capital.
  • Woori Bank is gathering investors to set up a firm with capital of 100 billion won.
  • Hana Bank is planning to set up a 1 trillion won fund with Cambridge Capital Korea and IMM Group.
  • Foreign players like Carlyle and Newbridge have enjoyed more than two-fold gains on their initial investment from their exits in South Korea.

Sources:

  • Asia Pulse
  • Chung, Sang-tae, "Private equity funds eager to enter S.Korean market," Asia Pulse, October 25, 2009
  • Yonhap