‘Small Giant’ SG PE on the way to getting bigger The accumulated AUM of a Korean mid-market PE firm exceeded $858 million this year

Translated by Ryu Ho-joung 공개 2019-12-19 08:01:01

이 기사는 2019년 12월 19일 08:00 더벨 유료페이지에 표출된 기사입니다.

South Korea’s mid-market private equity firm SG Private Equity had another busy year in 2019. Also known by its nickname ‘Small Giant,’ the firm has continued to build its reputation on turning small and mid-size companies struggling with financial difficulties – yet having strong technological capabilities – into profitable ones.

Successful exits

One of its successful acquisitions was Cosmo Chemical. The domestic chemical company specializing in titanium dioxide, whose financial condition had been badly hurt in 2013 due to a slowing economy and dumping by Chinese exporters, was sold to SG PE and private equity firm Keistone Partners in 2015.

After years of painful restructuring under SG PE, Cosmo Chemical succeeded in turning around its business, posting six billion won ($5.2 million) of operation income in 2018. SG PE has exited its investment in the company earlier this year, generating over 32 percent of an internal rate of return.

SG PE has made another successful exit this year, selling its display parts maker Anapass. GCT Semiconductor, the American subsidiary of Anapass, recently kicked off preparation for its planned listing on the domestic exchange, boosting the value of Anapass shares. SG PE seized this opportunity to sell its stake in the company in a block transaction in May, delivering 45 percent of an internal rate of return.

SG PE has liquidated its 10th fund this year, with an aggregate amount of liquidation reaching 350 billion won ($300 million) and a gross internal rate of return of 17 percent.

Three investments in 2019

SG PE’s first investment in 2019 was waste management company Changwon Enertech. SG PE invested 21.5 billion won ($18.5 million) in the company, together with other private equity firms. The private equity firm has continued to increase its investment in the waste management sector, where companies generate stable cash flow overall, after its investment in landfill company Borim CS back two years ago.

In August, SG PE invested in E-Land Eats, the food service unit under South Korean retail giant E-Land Group, which was recently split off from the conglomerate’s another affiliate E-Land Park. E-Land Eats owns total 16 restaurant brands. A consortium led by SG PE has signed a deal to buy a 40 percent in the company for 100 billion won ($85.8 million).

SG PE also invested in KC Industry this year. The company is number one precast concrete producer in the domestic market and listed on the country's stock exchange for small to medium-sized growth companies called KONEX. KC Industry posted the fourth largest 12-month revenue among firms listed on the KONEX, though its debt ratio is more than 350 percent. SG PE plans to put efforts to improve the company’s financial performance with the aim of transferring the listing of KC Industry shares from the KONEX to the KOSDAQ, the Korean version of NASDAQ.

With these three investments added this year, the number of SG PE’s current and previous investee companies has increased to 36 in eight years since its inception, with the accumulated assets under management of one trillion won ($858 million).

Swelling the size

This year, many domestic institutional investors – including National Pension Service, Korea Growth Investment Corp., Korean Teachers' Credit Union and Korea Scientists and Engineers Mutual-aid Association – have appointed SG PE as an external manager, injecting a large amount of money through their fund-of-funds vehicles. In addition, SG PE is currently working on raising money for its third blind-pool fund, aiming to close the fund at 500 billion won ($430 million) early next year. Its fundraising goal is likely to be met, with the firm already pooling in 400 billion won ($343 million) so far.

SG PE has recently hired Kim Yang-woo, an expert of post-merger integration, as part of its effort to strengthen its workforce. Prior to joining SG PE, he worked at Midas Asset PE, the private equity unit under Midas Asset Management. The number of SG PE’s staff has increased to 16 from 11 at the beginning of this year. It should be worth watching in the future if the private equity firm could maintain its own culture of investment, with its size continuing to grow.

(By reporter Jo Se-hun)
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