IMM raises $1.8b for fourth Korea fund

Fund IV launched at the start of 2019 and reached a first close of $1.3 billion in July of that year. Korean investors, including the National Pension Service (NPS), contributed $900 million. The final domestic-overseas split will be 85-15, nearly the same as IMM’s third fund, which closed in 2016 on $1.16 billion.

“It has been a pretty tough last nine months, but what has really helped is a lot of the Korean and international investors who have committed to the fund have been tracking us for the last two or three years,” said Hae-Joon Joseph Lee, a partner and CIO at the firm. “There was no need for them to do on-sites or in-person management interviews this year because they’ve already been done. Based on that, and our consistent performance, we were able to get investors comfortable.”

The international LP base includes sovereign wealth funds, pension funds, insurance companies, and fund-of-funds. Historically, the likes of NPS, Korea Post and Korea Teachers’ Credit Union have featured prominently among IMM’s local backers.

Fund IV is already about 35% deployed across four deals. The first two investments – a $1.2 billion carve-out of global industrial gases player Linde’s Korea-based assets and the purchase of KRW750 million in convertible preferred shares in Shinhan Financial Group – featured more than $600 million in co-investment. Both closed in 2019.

Early in 2020, IMM completed a KRW134.7 billion investment in HanaTour, Korea’s largest travel operator, and agreed a $500 million carve-out of Korea Kolmar Holdings' drug outsourcing business several months later. For the latter deal, on-site due diligence and in-person negotiations proceeded under strict social distancing conditions. International co-investors interviewed Kolmar management by Zoom and viewed video footage of the factory sites. The transaction is likely to close by year-end.

The first of IMM’s three exits, Tailim Packaging Group, was agreed in late last year and closed early in 2020. Sae-A Trading bought the cardboard box manufacturer for an enterprise valuation of $1.5 billion. IMM secured a 2.3x return on an investment made from Funds II and III. An approximately 2x return followed in October as Hollys Coffee was sold to KG Inicis for KRW145 billion. IMM backed the food and beverage chain in 2013 through its second fund and supported a domestic and regional expansion.

Hollys’ entry into China and Southeast Asia leveraged the Korean Wave effect with K-pop featured prominently in outlets. The thesis for Lezhin Entertainment was similar. An online distributor of cartoons based on Korean movies and TV dramas, it has more than eight million subscribers across Korea, Japan, and the US. Demand for its English-language service has grown by more than 100% a year in recent years on the back of rising interest from overseas customers.

IMM invested KRW50 billion in Lezhin in 2016 and recently agreed to the initial part of a two-step exit process. A listed entity in the same industry will buy a stake in Lezhin in the first quarter of 2021, resulting in a cash realization for IMM. This will be followed by a full merger, with the GP receiving shares in the listed entity. It will then help the company achieve further growth.

“Lots of international investors are looking at us, and at Korea in general, because the market is quite liquid in terms of investments and exits,” Lee added. “It’s worth noting that Korea didn’t do a full lockdown in response to COVID-19; we did more tech-oriented containment through aggressive tracing. As a result, companies like Hollys didn’t see a significant drop in revenue and EBITDA. Many Korean businesses that were able to adjust to the new environment have fared better than expected.”

Following robust performance in 2020, IMM has launched sale processes for two more investments, Taihan Electric Wire and online fashion mall W Concept Korea. They are in Fund II and Fund III, respectively. Taihan is one of three assets remaining in the second vehicle, alongside Kyobo Life and Hyundai LNG Shipping.

IMM will be the second Korean mid-market private equity firm to register a significant final close in 2020 following VIG Partners announcing it had raised $810 million for its fourth vehicle in January. Last year, Hahn & Company closed the largest Korea-focused fund backed by an independent manager after securing $3.2 billion – including a $500 million co-investment pool – for its third fund.

Atlantic Pacific Capital served as placement agent for IMM's fourth fund.

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• Topics
• Fundraising
• North Asia
• Buyout
• GPs
• South Korea
• IMM Private Equity