IMM closes third Korea fund at $1.15b

The fundraising process began in late 2014 and a first close of KRW485 billion was reached in March of last year as Korea Post came in with a substantial re-up. It is said to remain one of IMM's three big domestic backers, alongside the National Pension Service of Korea (NPS) and Korea Teachers' Credit Union. Local LPs contributed just under $1 billion of the overall corpus.

The $200 million from international LPs represents a sizeable increase on Fund II - known as IMM Rose Gold Private Equity Fund II - which closed at $720 million in late 2012, with foreign investors accounting for a much smaller percentage than the 17% for the new vehicle.

Explaining the increase in overall fund size, Hae-Joon Joseph Lee, senior managing director at IMM, noted that the 10 investments in the previous fund were worth an aggregate of about $1.8 billion, including co-investment and debt and mezzanine financing.

"Given we have shown we can do $1.8 billion in three to four years, fund size slightly over $1 billion was a point our LP investors and our team were comfortable with," he added. "Our investors are confident we can deploy $300-500 million per year by focusing on conglomerate carve-outs and midcap founder cash-outs."

The GP will continue to target mid to large cap deals of $100 million to $1 billion in enterprise value across five sectors: consumer and retail, healthcare, technology and media, financial services, and value-added manufacturing. However, Lee does see more traction in intellectual property-related and service-oriented industries.

"Korea was known as a very manufacturing-oriented economy but we have seen the emergence of local TV dramas and movies, cosmetics, food and beverage, and apparel - and a lot of demand from Chinese, ASEAN and Japanese tourists," he said. "These areas are seeing substantial growth, sometimes 3-5 times faster than GDP."

Hollys Coffee, which IMM is said to be in the process of selling, is an example of a service-oriented company that has leveraged the "Korea Wave" effect. When expanding into China, Hollys positioned itself as an outpost of domestic culture by sponsoring music events and then featuring images of pop stars in its menus and allowing customers to play clips on screens in its restaurants. It enables the brand to differentiate itself from Starbucks and local competitors.

The private equity is in the process of exiting its first and second funds. One of the last deals out of Fund I - which closed at KRW312 billion in 2008 - was Doosan Defense Systems & Technology. IMM and co-investor Mirae Asset Private Equity sold their combined 49% interest earlier this year when Hanwha Techwin bought the entire business for KRW695 billion. The return is said to be more than 2x.

Strong performing investments from Fund II include Taihan Electric Wire, a turnaround deal for a publicly-listed cable manufacturer for which the share price is now more than 4x IMM's investment cost, and Handok Pharmaceutical, which is almost fully exited at a 3-4x return.

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• Topics
• North Asia
• Fundraising
• Buyout
• GPs
• LPs
• South Korea
• IMM Investment
• National Pension Service (Korea)