How to do Korea M&A

Unison Capital’s acquisition of Nexcon Technology last year avoided controversy by stressing cooperation and staying below the radar. Could it change Korean perceptions of private equity?

When Kim Soomin first approached the management of Nexcom in February 2012 he knew that he had to tread carefully. He represented Unison Capital, a Japanese private-equity firm that had identified the Korean technology company as an investment opportunity and as a target.

Public opinion in Korea has been hostile to private equity firms for more than a decade, blaming them for preying on local companies weakened and vulnerable in the wake of the Asian financial crisis.

In popular perception, Texas-based Lone Star’s acquisition of Korea Exchange Bank in 2003 epitomised the cowboy behaviour of predators long of cash but short of responsibility.

But the Unison partner walking into Nexcon’s office had another reason to be especially diplomatic. Although former Goldman Sachs banker John Ehara, who set up Unison in 1998, has a Korean lineage, the firm is Japanese.

“There were two mental barriers to overcome: passing control to a private equity fund and being absorbed by a Japanese firm,” says Kim. “A phobia had developed within the company about the predatory and hostile behaviour of private-equity funds due to bad experiences with domestic firms.”

Kim, an ex-partner at Bain & Company’s Seoul office, “did extensive homework and asked the right questions” in order to convince Nexcon that Unison could “provide solutions”.

Nexcon is a leading supplier of battery management-system products for mobile handsets and notebook PCs. Its customers include LG Chemical and Samsung SDI, Sony and Sanyo, and its batteries are widely used in products designed by Apple, Samsung Electronics, Nokia and Lenovo.

It is an impressive list of clients, but there is a downside. The purchasing power of such vast conglomerates ties small and medium-sized enterprises (SMEs) such as Nexcon into a dependent relationship, undermining their autonomy.

A buyout by a private equity firm with management participation would allow an SME with state-of-the art technology, but with limited business management expertise, to release itself from the shackles of chaebol dependence and control, and realise its full commercial potential...


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