Fund focus: Hahn eyes more big buyouts

Private equity investors have deployed $43 billion into Korean buyouts since Hahn & Company closed its second fund at $1.2 billion in 2015. This represents 16% of the Asian total for these transactions – in a country that accounts for 1.2% of the region’s population and 5.5% of its GDP. Korea is also responsible for about one-fifth of the 100-plus buyouts of $500 million and above announced in Asia during this period and one-fifth of the 50 that have surpassed $1 billion.

If Korea punches above its weight has a buyout destination, Hahn & Co. is doing the same as a private equity firm. Founded eight years ago by Scott Hahn, formerly CIO of Morgan Stanley Private Equity Asia, the GP has now raised more than $6.7 billion. This includes $2.7 billion for the recently closed Fund III. It is more than twice the size of its predecessor and the largest Korea-focused vehicle ever raised by an independent manager.

“There are some sizeable opportunities here and we have demonstrated an ability to get access to large transactions in industries that are strategically important in Korea,” Hahn tells AVCJ. “SK Shipping was $3.7 billion, Hanon Systems combined with the Magna International follow-on acquisition was $6.1 billion, and Ssangyong Cement was $2.2 billion. We’ve also done deals in the $200 million range where we have aggregated them into bigger platforms.”

SK Shipping, Hanon and Ssangyong rank among the dozen largest buyouts seen in Korea since the close of Fund II. Hanon was announced before the fund close, but actions happened in tandem: a $700 million co-investment sidecar was raised alongside the core vehicle to help cover the equity portion of the deal. Total co-investment in Fund II transactions amounted to $1.4 billion. There is also a $500 million sidecar alongside Fund III that will allow Hahn & Co. to flex up for larger deals.

Hanon is an oddity in that the business was carved out from a multinational, US auto parts maker Visteon Corp. Domestic chaebols are the private equity firm’s most frequent counterparty. Hahn expects this to remain the case – and not necessarily because of distress.

“Chaebols increasingly want to trade in and out of businesses, to strengthen at the core. This is done through choice; it’s not like the Asian financial crisis twenty years ago where they were selling out of need. None of our deals have happened because the seller didn’t have access to capital,” he explains. “I think this is just the beginning. There isn’t that much momentum right now – it’s just us and a few others doing these deals – but it should pick up consistently over time.”

Hahn & Co. has deployed $1.3 billion in equity over the past 12 months, but SK Shipping is the only primary deal. The other transactions were the Hanon bolt-ons and additions to the Lahan hotel portfolio. Despite the sizeable increase in fund size, there will not be any change in strategy. It will be a continued diet of carve-outs and platform deals across business services, industrials, manufacturing and a dash of consumer.

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• Topics
• North Asia
• Buyout
• Fundraising
• GPs
• South Korea
• Hahn & Co