Deal focus: ACE secures industry 4.0 buyout

ACE Equity Partners, a recently established Korean middle-market buyout firm, has completed three investments. Last year, it backed Aim Systems, a factory automation software provider, and Dong Ah Chemical, a manufacturer of eco-friendly chemicals. The third deal is worth more than the first two combined: ACE has paid around $200 million for Woojin Electric Machinery.

The private equity firm’s conviction is rooted in familiarity with the asset and a belief in the potential of “industry 4.0.” “This is one of the few Korean businesses that serves all the country’s blue-chip companies, including Samsung Electronics, SK Hynix, and LG Group,” says David Ko, CEO of ACE. “Growth will come from these companies increasing their semiconductor and display capacity and from the Chinese market and bolt-on acquisitions.”

Ko spent a decade with SkyLake Investment before setting up ACE last August. Three years ago, he led the firm’s purchase of a 70% stake in Woojin for KRW117 billion ($106 million). The latest transaction saw ACE and the company’s founder – who retained a 30% interest – take out SkyLake. A project fund managed by ACE now has full ownership of Woojin and the founder is an LP in that vehicle. Asia-IO Advisors also participated in the deal.

The preferred outcome for Woojin is an IPO in 2019. Before that, ACE plans to pursue domestic consolidation – the company already controls 80% of its industry segment – and enter China. This will be done in conjunction with Aim Systems, which has an established client base in the country. Woojin provides specialist equipment and related services that enable manufacturing plants to maintain a constant and consistent power supply. 

“Aim Systems has an 80% share of the China display market. There could be a strong synergy between Aim Systems and Woojin,” says Ko. “There is also the possibility of merging the two companies to form a much larger entity with stronger financials. We could do an IPO after that, although we are open to a strategic sale as well.”

Woojin is already receiving inquiries from groups in China and Korea that want to explore collaboration opportunities. It is part of what is described as a “multi-year trend of smart factory adoption” as companies pursue efficiencies through the introduction of cloud computing, big data and artificial intelligence to their production lines. This is the second time Asia-IO has participated in a transaction led by ACE. Industry 4.0 is a prevalent theme in the former’s investment strategy and Ko expects the same for the latter.

“We are striving to be one of a few sector specialists. I don’t see anyone apart from SkyLake and us doing mid-market buyouts in the technology sector,” Ko adds. The firm has around KRW350 billion ($327 million) in assets under management. Investments have thus far been made through three project funds, but there are plans to raise a blind pool from domestic and foreign investors.    

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• Topics
• North Asia
• Greater China
• Buyouts
• Technology
• Trade sale
• South Korea
• Ace Equity Partners
• manufacturing
• Skylake Incuvest & Co.