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South Korea’s VIG hits first close on Fund V, eyes exits – Partners

  • Fund V on track to beat Fund IV in terms of local LP contribution
  • PreedLife preferred bidder expected to be named in March
  • Corporate carve-outs, healthcare tech seen as attractive buyout targets

South Korea’s VIG Partners has reached a first close of KRW 470bn (USD 354m) on its fifth fund, and the middle-market buyout manager is now looking to accelerate its exit activity as fund marketing efforts extend into the international sphere.

VIG, which is looking to raise approximately USD 1bn in total, focused solely on domestic LPs in the first close. It will start targeting international LPs in earnest later this month, according to Jason Shin, a senior partner at the firm.

This coincides with a sale process for funeral services provider PreedLife, which is the product of an industry consolidation play involving VIG’s third and fourth funds. Originally slated for inclusion in a continuation fund, the company is now on course for a full sale. Chulmin Lee, co-CEO and a managing partner at the firm said a preferred bidder is likely to be chosen in March.

In addition to PreedLife – which is expected to achieve a valuation of around KRW 1trn (USD 753m) – VIG is exploring one or two other exits this year.

Autoplus [a used car sales business acquired in 2017] might be among the candidates,” he said.

Of VIG’s portfolio companies, PreedLife has the highest Mergermarket Likely to Exit (LTE) score, with 80 out of 100. Autoplus is next with 25, followed by food ingredients supplier Foodist, formerly Winplus, online education business D.Share, and healthy beverage brand Teazen.

VIG attracted strong support for Fund V’s first close despite Korea’s National Pension Service (NPS), a longstanding LP, excluding the firm from its 2023 allocations to local private equity managers. VIG is expected to target the 2024 allocation instead.

In the absence of a large cheque from NPS, the first close featured more medium-sized commitments in the USD 40m-USD 50m range, according to Shin. Two-thirds of the total came from existing LPs such as top-tier commercial banks, investment banks, and insurance companies. New investors include Teachers’ Pension and a government-linked fund.

Fund V first close is on par with the overall commitments received from domestic LPs in Fund IV. That vehicle closed on USD 810m in early 2020, with domestic and foreign investors each accounting for 50% of the corpus. VIG raises separate onshore and offshore tranches that invest in parallel.

VIG’s strategy is broadly unchanged: it targets control investments in mid-market companies, primarily in the consumer, lifestyle, and services sectors.

Founder succession situations – negotiated on a bilateral basis – represent the firm’s key sourcing channel, but Lee noted increasing corporate carve-out opportunities. VIG will participate in auctions to capture those opportunities, but only selectively. Target businesses are likely to have enterprise valuations in the USD 70m-USD 500m range, he added.

Healthcare technology and services are also expected to feature more prominently in VIG’s deal flow, although the firm has yet to invest in the space, Lee said.

“We specialize in local-centric deals where we can leverage our local knowledge and networks,” he added.

Established in 2005, VIG has USD 2bn in assets under management across four buyout funds and one credit fund. The launch of Fund V marked a transition in leadership intended to enable the firm to leverage key trends in the Korean market such as the rise of younger entrepreneurs.

Lee remains CEO and a managing partner. Changhoon Shin, formerly a partner, has been promoted to co-CEO and managing partner. Byeong-moo Park, who represents the generation before Lee and the elder Shin, has ceded his managing partner title and is no longer involved in day-to-day operations. Park still sits on the investment committee alongside Lee and the two Shins.

The investment committee is now six-strong, following the promotion of two younger team members to partner level, effective January 1. They are Yunbak Chung and Younggi Han.

Eaton Partners is serving as placement agent for Fund V, Lee and Shin said. Kim & Chang provided legal counsel for the domestic fundraising process.