Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
'Korean version of Elliott' becomes feasible
Gettyimagesbank
By Park Jae-hyuk
Seoul set to ease ownership rules on local private equity firms
By Park Jae-hyuk
MBK Partners, Hahn & Company, IMM Private Equity and other Korean private equity firms (PEFs) will be able to compete fairly with their foreign peers in the local capital market.
If the National Assembly abolishes discriminatory regulations against domestic PEFs, they are expected to engage in shareholder activism and invest in domestic unicorns with high growth potential.
According to the National Policy Committee, Sunday, its members agreed last week on a revision of the Capital Markets Act, which includes the abolishment of the so-called “10 percent rule” that forces PEFs meddling with the management of companies to acquire more than 10 percent of voting shares or a board seat in companies in which they invest.
The revision bill is highly likely to be passed in a provisional session in March because the ruling and opposition parties are in rare agreement on it. If the Assembly passes the bill, it will be enforced in September at the earliest after the government's pronouncement.
It was initially expected to be passed during the 20th National Assembly, but the plan hit a snag following a series of fund fiascos that caused massive losses for local investors. The previous bill expired automatically with the end of the 20th National Assembly last year.
Yeouido financial district in Seoul / Gettyimagesbank
Domestic PEFs, however, have continued to demand financial authorities offer a “level playing field.”
“When we make investments overseas, the government has not lifted regulations applied to our investments in Korea, so it has been difficult to explain requirements for domestic investments to foreign companies in which we sought to invest,” Kwag Dae-hwan, chief operating officer of STIC Investments that chaired a PEF lobby group until last year, said in a previous interview with The Korea Times.
The Korea Financial Investment Association also urged the 21st National Assembly last June to revise the Capital Markets Act.
Korea Capital Market Institute senior research fellow Park Yong-rin said during a webinar in February that domestic PEFs have suffered from discriminatory regulations, despite their provision of liquidity for businesses going through restructuring during an economic downturn.
In response, the Financial Services Commission promised it would continue its efforts to reform the regulations.
Market participants expect the new law will enable local PEFs to serve as “white knights” to protect Korean conglomerates from the threats of foreign activist funds, such as Elliott Management, Sovereign Asset Management and Whitebox Advisors, which have freely meddled with the management of Samsung, Hyundai Motor, SK and LG, using only a small number of shares.
In addition, the acquisition of minority shares in Korean unicorns by domestic PEFs can be brisker.
Promising companies here, such as Krafton, Kakao Bank and Kakao Mobility, have attracted investments from foreign PEFs, including Hillhouse Capital, TPG, Anchor Equity Partners and Carlyle, because they do not need to secure more than 10 percent of voting shares or a board seat.
After the National Assembly eases the regulation, Korean PEFs will be able to make better offers and take part in many lucrative deals.