South Korea’s largest conglomerates are selling off their non-core units as they restructure
for the future. In response, Private Equity firms have been actively participating in these
carve-out deals, some formed specialized funds exceeding 1 trillion won, indicating their
growth.
These deals offer big opportunities but they come with complex risks. In this carve-out trend,
deep local knowledge is often the difference between a great buy and a costly mistake.
The Great Korean Sell-Off
Something unusual is happening in South Korea’s corporate landscape: the titans are selling.
Over the past two years, Korea’s powerful family-run conglomerates, or chaebols, have
ramped up “carve-out” M&A, selling off non-core business units at record pace. In 2022, just
eight such deals closed. By 2024, the number more than doubled to 17.
And these aren’t small assets.
SK Group alone offloaded ₩1.91 trillion (USD 1.43 billion) worth of units over the past year.
Lotte divested its major car rental business for ₩1.6 trillion (USD 1.2 billion). Across Seoul,
boardrooms are in reset mode — with LG, Hyundai, POSCO, and Shinsegae all trimming
legacy operations.
Why It’s Happening
For the Sellers
For the chaebols, this is less a fire sale and more future-proofing.
Many are repositioning for long-term growth. “Reshaping a 300 trillion-won company is no
easy task,” said a senior SK Group executive. The group is prioritizing AI and energy. Hyundai
is betting big on EVs and robotics. Legacy divisions are being sold not because they’re weak
but because they’re no longer core.
Rising global uncertainty is another driver. “The beginning of the second Donald Trump
administration in the U.S., rising geopolitical uncertainties, and fierce competition with
China” are all prompting conglomerates to build cash reserves and consolidate their
strengths.
For the Buyers
Private equity firms see massive opportunity.
With abundant dry powder and limited quality deal flow, carve-outs offer proven units with
cash flow, IP, and loyal customer bases — often at attractive valuations.
Hahn & Company has been especially active, acquiring SK Enpulse’s CMP pad business and
SK Specialty. Global names like KKR and MBK Partners are also circling.
“The carve-out wave reflects how both Korean corporates and the PE market are maturing,”
said Hojun Lee, Korea Head at Arches, an Asia leading expert network. “But the edge won’t
come from capital alone, it’ll come from knowing what’s inside these businesses, and how to
make them stand on their own.”
The deals come with big risks
Carve-outs offer buyers trained talent, proprietary tech, and customer relationships. But
they’re rarely straightforward.
“It’s like buying the engine while the plane is still flying,” said one Seoul-based banker.
A pan-Asia PE director added, “Carve-outs grant investors IP and operational capabilities that
would take years and huge investment to develop organically.” With geopolitical shifts and
saturation in the West, Korea’s mid-cap market is becoming a top target.
The risks are real:
- Operational Complexity
Many Korean units depend on shared corporate services such as HR, IT, finance. Untangling
them takes time, money, and precision.
- Information Gaps
While audited statements exist, key drivers: supply chain risk, tech obsolescence, customer
stickiness are rarely transparent.
“Foreign investors face challenges to comply with and navigate through various regulatory
requirements, including those found under the foreign exchange regulations,” said Chambers
and Partners.
Cultural nuance adds friction. “Korea remains a relationship-driven market,” noted one
cross-border M&A lawyer. “If you don’t know how to ask the right questions or who to ask,
you’ll miss critical issues.”
- Regulatory Sensitivities
After public pushback on MBK’s Homeplus acquisition, regulators are watching carve-outs
more closely, especially in consumer-facing sectors. At the same time, Korea’s strict labor
laws and national security reviews under the Industrial Technology Protection Act also raise
the bar for deal execution.
“Regulatory shifts are becoming a real variable in deal timing,” said a Seoul-based M&A
advisor. “We’re seeing more cases where filings are delayed or conditional on employment
guarantees.
How Smart Investors Win
The greatest challenge in these transactions isn’t capital or even strategy, it’s information.
Traditional diligence isn’t enough. Spreadsheets can’t tell you what’s happening inside a
factory. Org charts don’t show you who really makes decisions.
To close this information gap, leading investors are tapping into expert networks – a sector
quietly booming alongside Korea’s M&A surge. Platforms like Arches connect investors with
former factory managers, retired regulators, and ex-executives who have first-hand
knowledge of target assets, helping buyers validate assumptions and identify red flags early.
“Traditional diligence gets you 70% there,” said Hiroki Kato, CEO of Arches. “But in these
high-stakes carve-outs, it’s the final 30%, the things that aren’t in the data room, that make or
break the deal.”
Arches’ new office in Yeouido, Seoul’s financial hub, reflects the rising value of local
expertise in global capital flows.
What comes next
The carve-out momentum shows no signs of slowing. Units like SK Siltron and LG Chem’s
aesthetics division are rumored to be next. But the terrain is shifting, geopolitics, trade, and
regulation could all reshape upcoming deals.
Still, Korea’s conglomerates aren’t just selling businesses – they’re unlocking value. The
winners won’t be the ones with the deepest pockets, but those with the sharpest insight.
The question isn’t whether there’s value. The question is: who’s close enough to see it?
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