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.
PEFs face difficulties in acquiring or selling manufacturers
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By Park Jae-hyuk
By Park Jae-hyuk
Private equity funds (PEFs) are facing difficulties in buying and selling manufacturers in the Korean market, as politicians are calling for measures to restrict them from intervening in the management of companies possessing core technologies or those involved in the materials, parts and equipment industries.
Changwon City Council members unanimously agreed last week on a proposal urging the central government to inspect PEFs pursuing short-term profits from their investments in the manufacturing industry and to ultimately prevent them from participating in the management of manufacturers.
Doosan Machine Tools, Mottrol, K Shipbuilding, STX Engine and PK Valve are among the manufacturers in the largest city in South Gyeongsang Province that have experienced the involvement of PEFs in their management.
“In the manufacturing industry, acquisitions by PEFs could lead to passive reinvestments and deterioration in long-term competitiveness, having negative impacts on the regional economy,” said Justice Party Councilor Choi Young-hee, who made the proposal in response to demands from labor unions.
Given that manufacturers in Changwon's neighboring cities, such as Samco in Sacheon, Welliv in Geoje, NBG in Miryang and Tool Korea in Haman, have also experienced the involvement of PEFs in their management, a similar proposal was made at the Gyeongsangnam-do Provincial Council by Justice Party Councilor Lee Young-sil.
“After PEFs started acquiring companies in South Gyeongsang Province, concerns have grown over the manufacturing industrial ecosystem and job security of workers,” the minor opposition party said in a statement Monday.
Changwon Mayor Huh Sung-moo also sent a letter last month calling on the central government and the ruling Democratic Party of Korea to take measures to force PEFs to use their profits to invest in manufacturing facilities and R&D.
The Ministry of Trade, Industry and Energy is especially focusing on the potential leakage of Korea's core technologies to other countries, based on the Act on Prevention of Divulgence and Protection of Industrial Technology that was revised in 2019 to force global enterprises to inform the government in advance of acquisitions of companies possessing core technologies.
The ministry has examined the acquisition of Hugel by GS Consortium, comprised of GS Group, IMM Investment, United Arab Emirates sovereign wealth fund Mubadala and Singapore-based CBC, which is viewed as a Chinese firm.
The consortium needs to receive approval from the ministry in order to complete the takeover of the botulinum toxin maker from Bain Capital.
Hahn & Company's ongoing attempt to sell a controlling stake in Hanon Systems is also expected to be subject to the ministry's screening, as Japan's Nidec has been mentioned as the strongest potential buyer.
“There is only a slim chance of LG, SK, Halla, Valeo and Mahle being mentioned again as potential buyers,” eBest Investment & Securities analyst Yoo Ji-woong said.
The analyst believed that the acquisition of Hanon Systems by a foreign firm will eventually receive approval, considering that the auto parts maker was previously owned by Ford. Hugel has also denied the possibility of the leakage of technologies after the acquisition, citing that Bain Capital had also received an approval for its acquisition in 2017 despite being a U.S. entity.
Industry Minister Moon Sung-wook, however, said in a National Assembly audit in October that the government will look into the sale of Hanon Systems once it receives an application for the deal.
“Hanon Systems possesses the nation's core technologies related to hydrogen fuel cell vehicles,” he said at that time, in response to Justice Party lawmaker Ryu Ho-jeong's question about the government's measures to prevent the leakage of technologies in the case where Hanon Systems is sold to a foreign PEF or a rival company overseas.