Fund focus: Unison hones in on South Korea

"It is similar to Japan in the sense that these mid-cap companies are dealing with inefficiency in management and talent acquisition is difficult at that size, especially in Korea," says T.J. Kono, a partner at Unison. "As a PE investor we can bring that expertise to the table. And then overseas expansion is definitely something a lot of these companies are looking at. We have a very specific leg up in our network in Japan and in the rest of Asia."

One of the stand-out early investments was Akindo Sushiro, a sushi restaurant chain that the private equity firm fully acquired over the course of 2007-2008. Unison increased store numbers, sales and EBITDA by 50%, 75% and 150%, respectively, took the business into Korea, and eventually sold it to Permira for a $1 billion valuation.

Bubble tea chain Gong Cha is going in the opposite direction, geographically speaking. Last autumn Unison acquired a 70% interest in the Taiwan-headquartered company's master franchises for Korea and Japan. The founder is holding on to the remaining 30%. An established player in Korea with 255 stores and around $50 million in annual revenue at time of acquisition, Gong Cha is about to enter the Japan market.

"That fits the bill as far as the type of investments we are looking for - control investments in small cap companies where we can bring a very specific management resource as well as an overseas network," Kono says.

Gong Cha is the first investment from the Korea fund, which has reached a final close of approximately KRW300 billion ($280 million). Unison is also in the process of raising its fourth Japan vehicle - a final close of around KRW75 billion ($624 million) is expected - but the LP bases are completely different. The Korean fund received an anchor commitment from the National Pension Service of Korea (NPS) and all the other investors are all Korean.

There was one Korea deal in Unison's third Japan fund, a KRW119.8 billion management buyout of Nexcon Technology, a manufacturer of lithium-ion battery packs and related products, completed in 2012. The PE firm has since helped Nexcon build up its Japanese customer base. The check size is too large for the Korean fund, but the investment thesis is close to the mark.

"Over the last couple of years we have started to look at the Korean market, largely starting from business opportunities related to portfolio companies we have acquired in Japan," says Kono. "We have seen other opportunities and we felt it was prudent to consider investments in Korea and we thought we had something to bring to the market that existing players do not."

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• Topics
• Fundraising
• North Asia
• Buyout
• Japan
• South Korea
• Unison Capital
• Fundraising
• buyout
• National Pension Service (Korea)