VIG makes second Korea funeral services acquisition

The private equity firm already has exposure to the space through Jo-Un Life, in which it purchased an 84% stake for KRW65 billion ($58 million) in 2016. This was said to be the first PE investment in Korea's funeral services industry. VIG plans to consolidate the two companies, creating a business with 1.5 million subscribers and cumulative advance payments of KRW1.2 trillion.

The size of the transaction was not disclosed, but VIG said that Preedlife is the first domestic funeral services provider to achieve an asset value of more than KRW1 trillion. Established in 2002 as a division of Hyundai Synthesis Mutual Aid, the company now operates four high-end funeral home franchises in the Seoul metropolitan area under Shillakwon brand. Preedlife previously set goals to reach KRW5 trillion in assets, KRW500 billion in annual sales, and five million customers by 2022.

Funeral services companies in Korea accumulate subscribers and assets much like insurers: they accept incremental prepayments intended to cover elaborate traditional funerals that typically attract hundreds of people and often involve three days of catered wakes and burial rituals. The cost ranges from $3,000 to $10,000. If the loss of a family member occurs within the contract period, subscribers are required to pay the balance of the service costs in a lump sum.

VIG's investment in Jo-Un life had two key drivers. First, families are decreasing in size, which means they lose capacity to coordinate traditional ceremonies. Structured payment plans are therefore in demand. Second, the industry is fragmented and lacks professional back-end management. At the time of the Jo-Un Life deal, the two largest players accounted for 20-30% of market between them. Jo-Un was one of a host of independent players with market shares of 1-5%.

According to VIG, the industry has more than six million subscribers and cumulative advance payments of KRW5.6 trillion. However, it remains highly fragmented and markedly undervalued.

"Capitalizing on the acquisition of Preedlife and the eventual merger with Jo-Un Life, VIG plans to further enhance customer perception and public trust towards the pre-paid funeral service business, thereby providing the necessary tailwinds to accelerate an industry-wide growth," the private equity firm said in a statement.

The first investment from VIG's fourth fund was announced last October, before the vehicle reached a final close. It involved the purchase of a controlling stake in D.Share, an online-offline English language education provider, for KRW165 billion.

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