Headland offers toymaker succession solution

Korea's toy industry is attractive because it is expected to grow in parallel with rising GDP per capita, yet barriers to entry are increasingly significant and a degree of consolidation is likely. YoungToys stands out by virtue of its unique animation-linked business model.

"It is a very interesting company in a very attractive sector," says Taigon Kim, Headland's head of Korea, who lead the deal. "It is the first toy company in Korea to introduce an animation series based on an own-brand character. It has included Korean content and culture in the animation, but there is no violence - there is educational content, which is very appealing to parents."

The character in question is Tobots, a range of car-to-robot transformers targeting children aged 3-6. YoungToys developed the concept for the cartoon and outsourced production to animation studios. The strategy has seen revenue grow more than 30% per annum in the last three years.

Supported by Headland, the company is now looking to expand the Tobot range to appeal to older age ranges and other markets in Southeast Asia.

"What we like about this region in particular is the rising demand for toys coming out of countries where the economy is still growing," says Marcus Thompson, CEO of Headland. "It is very different to exporting toys to American or Europe where the outlook for demand is more uncertain."

YoungToys was a classic succession-planning opportunity. The company founder decided to retire, but without any family to assume control of the business, turned to private equity investment. Thompson explains that retiring founders tend to concerned about their reputation and the success of the company following a sale and are therefore often keen to work closely with investors and communicate their vision.

"From a founder's point of view selling to private equity is often easier than selling to a strategic investor," Thompson adds, "because quite often that strategic investor may have been a competitor, so it can be more difficult when the company has its own culture. Private equity can help retain the founder's existing culture in a better way than having a strategic come along and integrate it into their own business."

This is Headland's 18th investment in South Korea and the 10th region-wide commitment from the private equity firm's sixth fund, which closed at $1.4 billion in December 2008. About 55% of the corpus has now been deployed.

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• Topics
• Consumer
• North Asia
• Buyouts
• Headland Capital Partners
• Consumer
• buyout
• South Korea