VIG invests in Korean funeral services provider

This is said to be the first private equity investment in the country's funeral services industry. VIG's commitment includes the purchase of KRW60 billion of new shares in Good Sangjo, which equates to an 86% interest in the business. The remaining shares will be held by Ho-Chul Kim, the founder, and members of the existing management team.

Good Sangjo is a pre-need provider in that subscribers enter into a contract for funeral arrangements ahead of the loss of a family member and then make monthly payments, much like a life insurance agreement. If the funeral occurs within the lifetime of the contract - normally 10-12 years - subscribers pay the unfunded portion in a lump sum.

Traditional Korean funeral ceremonies typically include a wake that lasts three days, during which food and beverages are served to guests, culminating in the burial of the deceased. Due to a fall in the average household size, there is growing demand for non-family financial assistance with these proceedings. Good Sangjo's services include a pre-selected coffin, shroud and transportation to the burial ground.

There are currently 4.2 million subscribers to funeral services in Korea, with prepayment agreements totaling KRW3.9 trillion. Good Sangjo is one of the top 10 players, with more than 80,000 subscribers and KRW75.9bn in prepayments received.

According to a statement, VIG's investment is the culmination of a four-year sourcing process. The GP concluded that the industry was undervalued - in part due to a general negative perception - and was encouraged by the similarities between the model and sales channel for funeral services prepayment and the life insurance industry.

VIG previously invested in Tong Yang Life Insurance, exiting the business last year to Anbang Insurance Group in a KRW1.13 trillion deal. It has added two former Tong Yang executives to the Good Sangjo management team as COO and chief marketing officer, respectively. Meanwhile, the new CFO used to head the strategic planning team at Burger King Korea, another former VIG portfolio company.

VIG is understood to be in the process of raising its third fund, which has a target of $500-600 million. The final investment from Fund II, which closed at $350 million in 2014, came in April with the acqusition of a majority stake in parking management business HiParking.

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• Topics
• North Asia
• Consumer
• Buyouts
• South Korea
• VIG Partners