Hahn & Co gets $1.9b for two funds

For Scott Hahn, the PE firm's CEO, who was previously CIO at Morgan Stanley Private Equity Asia, working Christmases have become par for the course. Sellers in Korea are often set year-end deadlines for completing a transaction and this leads to a rush of activity in December.

However, December 2014 was particularly busy or Hahn & Co. Before the documents were signed for Posfine, the firm closed its second fund at $1.2 billion and agreed a $3.6 billion buyout of Halla Visteon Climate Control Corporation (HVCC). In addition, a $700 million co-investment vehicle was raised to support the HVCC deal.

Extra capital was required due to the sheer size of the transaction. Hahn & Co. teamed up with local manufacturer Hankook Tire to acquire the asset, but its individual contribution still came to around $2.6 billion - well beyond the capacity of the firm's first fund, which closed at $750 million in August 2011.

Given that Fund II launched in mid-July and spent about five months in the market before closing at the hard cap, there was clearly demand from LPs to participate in Korea's robust buyout story, so Hahn & Co. invited them to take some direct exposure. The National Pension Service is also understood to be involved.

"People are now trying to get increasingly custom-tailored fund products with different economics and fund life. There is going to be more creativity in terms of fund structure and design," Hahn says of the decision to raise a co-investment vehicle alongside the main co-mingled fund.

According to AVCJ Research, private equity investment in South Korea reached a record $10.8 billion in 2014, with buyouts accounting for $7.7 billion of the total. The country's share of Asia-wide buyouts came to 26.7%, up from 17.2% in 2013. Two deals really moved the needle in 2014 - HVCC and The Carlyle Group's $1.93 billion acquisition of Tyco International's Korea unit.

However, Hahn believes that foreign PE firms are losing ground to local players such as MBK Partners, Vogo Investment, IMM Private Equity and Hahn & Co (all of which are registered with the Korean regulator). These firms contributed about 45% of the $18 billion in disclosed buyout deal flow since 2013. This is nearly twice the share of the big regional and global funds, although MBK is a large regional firm.

"The market is significantly skewed towards the local private equity players because there is a lot of capital available in Korea, more experience among the local managers, and in many cases they are the preferred buyers for businesses," says Hahn.

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• Topics
• Fundraising
• Buyout
• North Asia
• Hahn & Co
• Fundraising
• buyout
• South Korea
• Co-investment