VIG Partners set to dominate funeral service market

VIG Partners founder Byeon Yang-ho

Mid-market buyout firm poised to defeat Boram Sangjo

By Park Jae-hyuk

VIG Partners has rapidly expanded its presence in the domestic funeral service market over the past four years, carrying out a series of “bolt-on” acquisitions of companies providing such services.

In the private equity market, a bolt-on acquisition ― or an add-on acquisition ― refers to an acquisition of a company which is in the same line of business with a private equity firm's (PEF) platform companies. This is mostly intended to increase the value of portfolio firms prior to sale.

After the mid-market buyout firm took over medium-sized Jounlife for 65 billion won ($53 million) with its third blind-pool fund in 2016, VIG bought Kumkang Mutual Aid for 6 billion won in 2017 and Modern for 10 billion won in 2019.

In particular, its latest acquisition of Preedlife, which has reportedly been approved by the Fair Trade Commission (FTC), is expected to give it a momentum to dominate the nation's funeral service market, defeating the leading player Boram Sangjo Group.

The homegrown PEF added the large-sized funeral service provider to its portfolio in April through a stock purchase agreement that is assumed to be sized at around 300 billion won.

Back then, it promised to speed up making efforts to improve the nation's funeral service industry.

“We are planning to focus on raising consumers' awareness of the funeral service industry and winning their trust,” a VIG official said at that time.

According to the FTC, the amount of money paid in deposits for future services by 86 funeral service providers here reached 5.5 trillion won as of September last year, and nearly half of the money has been held by Preedlife and Boram Sangjo.

Boram Sangjo announced in March it became the nation's first funeral service provider to hold over 1 trillion won in deposits, because of its merger with Korvafamily, the Korea Veterans Association's funeral service provider having over 300 billion won in deposits.

With its deposits amounting to 1.2 trillion won, the company took the top spot in the domestic funeral service market, beating out Preedlife that had collected 919.3 billion won in deposits at the end of 2019.

Preedlife, however, announced Tuesday the amount of money collected in the form of deposits also exceeded 1 trillion won as of the end of May.

VIG also said its four funeral service providers collectively hold nearly 1.2 trillion won in deposits.

“We've been able to win an overwhelming victory with our 1.5 million customers and 1.2 trillion won deposits,” the company official said at the time of the Preedlife takeover.

However, the PEF is facing a severe backlash from the funeral service workers union over the acquisition.

“A PEF's acquisition of a large funeral service provider could cause massive damage to consumers,” union leader Lee Sang-jae said in a statement. “PEFs aim to buy undervalued companies and resell them after raising their enterprise value, but they are not interested in improving the long-term value of the companies they acquire.”

The union also called for thorough supervision by the antitrust watchdog to restore consumer trust in the funeral service industry and to promote sound management.

Against this backdrop, market observers are paying keen attention to VIG's next step, wondering whether the PEF would make a long-term investment in its funeral service providers.

The Korea Times tried to reach VIG several times to ask about its plan, but the company did not respond.