VIG buys Korean used car retailer for $97m

Of the total commitment, KRW50 billion comprises new shares and the capital will be used to grow the business. The rest will take out shares held by the founder and management, although the former, Deuk-Myung Kim, will re-invest part of his proceeds into VIG’s acquisition vehicle and hold a minority stake. He will also remain CEO.

“We will inject new capital, strengthen the national sales channel, and build a more recognized brand, which will translate into higher sales, particularly directly to the retail market,” said Jason Shin, managing partner at VIG. “Korea’s used car market is worth $20 billion a year but $19 billion of that is in the hands of mom-and-pop players. Like other, more developed markets – whether it’s the US, Japan or Australia – the industry is heading towards larger players taking a much bigger share.”

Autoplus is the only independent operator among the three companies that dominate Korea’s used car market. The others are AJ Sellcar, which is controlled by AJ Group, a conglomerate best known for its car rental business, and SK Group-owned SK Encar. The latter claims to sell more than 100,000 cars a year through its website alone.

Autoplus was founded in 2000 as an on-site maintenance provider and opened its first used car dealership in 2004. The company now provides solutions that cover every aspect of car ownership, from sale to acquisition financing to maintenance services to refurbishment of vehicles for re-sale. It is one of only two companies in Korea that sells certified used cars for domestic automobile brands. (SK Encar is the other, but it doesn’t have repair, maintenance and refurbishment capabilities.)

While Autoplus has six showrooms nationwide compared to 30 branches and agencies for SK Encar, one of the company’s Seoul sites does more than just exhibit vehicles for display: it also serves as a refurbishment plant that is open to prospective customers. “They show customers how refurbishment happens – you can see the mechanics at work – and that helps to build trust,” said Shin. “We think there could be one of these centers in each of the top five metropolitan areas.”

Autoplus generated sales revenue of KRW190 billion in 2016, up from just KRW90 billion four years earlier. VIG hopes to increase this figure by building a physical presence in the form of additional showrooms and refurbishment centers, developing the company’s online presence – which thus far has not been a primary objective for management – and brand building. Growth is expected to be entirely organic.

Shin compares the investment to the acquisition of Bodyfriend, Korea’s largest manufacturer of massage chairs, in 2015. In each case, VIG identified an industry with potential, narrowed its focus to a particular company, and then established a relationship with the founder, leading to a proprietary transaction. “This deal is within our sweet spot – riding the macro trend of Korean consumers moving in the direction of more developed markets like the US and Western Europe,” he added.

VIG is currently investing its third fund, having reached a final close of $600 million in February.

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