[PE Now] Platform Deals Return to the Market... Kakao Mobility and Baemin Lead the Way Out

From Golden Age Growth Industry to a Mature Industry
Exit Strategies Evolve... Now Only Giants Can Enter

There was a time when platform companies were highly sought-after assets by both private equity fund (PEF) managers and strategic investors (SI). The expectation was that a solid user base and a dominant market position would allow for high profitability. However, as interest rates rose, platform regulations tightened, and the IPO market slumped, enthusiasm for platform investments quickly cooled. Recently, however, with the potential for large-scale deals involving companies such as Kakao Mobility and Baedal Minjok being discussed again, there are signs of renewed activity in the previously frozen platform deal market.

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According to the investment banking (IB) industry on May 26, as IPOs became blocked, Kakao Mobility—where financial investors (FIs) such as TPG had been unable to exit their investments for years—is now being mentioned as a possible candidate for a US American Depositary Receipt (ADR) listing or a sale. Baedal Minjok has also reportedly returned to the market as a potential deal, drawing attention to whether the exit path for stalled platform 'mega-deals' will finally reopen.

The Golden Era of Platform Deals

At the peak of platform deals, even trades between PEs alone could generate high returns. A prime example is the online recruitment platform JobKorea. H&Q Korea sold JobKorea to Affinity Equity Partners in 2021. The sale price was reportedly in the 800 billion won range, with H&Q reportedly realizing a return of about 8.5 times its original investment.

Baedal Minjok is regarded as the symbol of platform 'mega-deals.' In 2019, Germany's Delivery Hero (DH) valued Woowa Brothers, the operator of Baedal Minjok, at $4 billion (approximately 4.75 trillion won at the time) and acquired roughly 88% of the shares held by domestic and international investors. This was a deal in which the No. 1 delivery app operator in Korea was recognized with a strategic premium by a global SI.

The subsequent sale of Yogiyo by DH to gain regulatory approval for the Baedal Minjok acquisition also demonstrated investment demand for platform assets. GS Retail formed a consortium with Affinity and Permira to acquire 100% of DH Korea's shares for about 800 billion won. Although this was a carve-out deal in accordance with the Korea Fair Trade Commission's merger conditions, at the time, it was still a market where SIs could acquire platform assets together with PEs.

Exit Difficulties: Cracks in Platform Investing

SSG.com is cited as a representative example of cracks appearing in the platform investment formula. SSG.com attracted a total investment of 1 trillion won from Affinity and BRV Capital. The investment structure included certain requirements, such as an IPO and gross merchandise value (GMV) targets, and also contained a put option clause that allowed FIs to demand a buyback of their shares if requirements were not met.

The problem was that the IPO did not go as expected. As competition in the e-commerce market intensified and market expectations for platform company valuations fell, SSG.com's listing was delayed. FIs pressured for the recovery of their investments, while Shinsegae Group and the FIs disagreed over the exercise of the put option. Although legal disputes were discussed at one point, the conflict was ultimately resolved by replacing the FIs rather than through litigation.

H&Q Korea, which succeeded with JobKorea, faced years of difficulties with 11st. In 2018, a consortium of FIs—including H&Q Korea, the National Pension Service, and Saemaeul Geumgo—invested 500 billion won in 11st. The investment structure at the time included a call option for SK Square to buy back the FI shares if an IPO was not achieved within five years.

Like SSG.com, 11st's IPO did not materialize, and it was also difficult to sell management control. SK Square once abandoned the call option, and although FIs tried to proceed with a sale through a tag-along right, no clear buyer emerged. Ultimately, 11st was reorganized by transferring it to SK Planet. SK Square and the FIs agreed to sell their entire stake in 11st to SK Planet. The total transaction amount is valued at 467.3 billion won.

An IB industry insider said, "In the past, even if a platform company was operating at a loss, its growth potential and market position enabled expectations for an IPO or a subsequent sale. However, after interest rates rose and growth stock valuations declined, it has become difficult to justify a high valuation based on the 'No. 1 platform' title alone."

Kakao Mobility Takes a Detour, Baemin Returns to the Market

Kakao Mobility has also been cited as a prime example of difficulties in exiting platform investments. The TPG consortium invested 500 billion won at the time of Kakao Mobility's launch in 2017, and with an additional investment in 2021, the cumulative investment increased to around 640 billion won. While domestic IPOs and share sales have been considered as exit strategies, various factors—including controversies over franchise taxis, accounting issues, market concerns about Kakao affiliates, and the recent regulatory stance against dual listings—have made securing an exit increasingly difficult.

Recently, however, the possibility of a US stock market listing and a stake sale is being discussed. Observers see FIs seeking solutions abroad in response to the burden of dual listing and platform regulations in the domestic market. However, if a large portion of the IPO proceeds is used for TPG's exit, criticism that this is merely an "exit-driven IPO" will be hard to avoid.

Baedal Minjok has also returned to the market. Its parent company, DH, has reportedly appointed JP Morgan as lead manager and is seeking a valuation of approximately 8 trillion won. Both domestic and international strategic investors, such as Naver, Alibaba, and DoorDash, are being mentioned as potential buyers.

Now a Mature Industry: Is the Platform Deal Playbook Changing?

Kakao Mobility and Baedal Minjok are not identical, but they share clear commonalities. Both are the No. 1 platforms in Korea, existing shareholders are under pressure to exit, and it has become difficult to find an exit solely through the domestic market.

This is also what the industry is focusing on. In the past, the main exit strategies for platform investments were domestic IPOs or sales between domestic and international PEs. Recently, however, all these paths have narrowed. Domestic IPOs are often blocked by issues such as dual listing, minority shareholder protection debates, and platform regulations, while PE-to-PE transactions have become difficult to execute on a large scale due to high interest rates and the burden of acquisition financing. As a result, exits for super-large platform assets are shifting toward overseas listings or sales to global SIs.

Whereas the market used to attach a strategic premium to platform growth potential, it is now shifting to a market where profitability, regulatory risks, and the sustainability of cash flow must be verified before anything else. A PE industry insider commented, "After COVID-19, even investors' perspectives on No. 1 platforms have changed. Now, platforms are being approached as a type of mature industry that must reliably generate cash, and as a result, likely investors are shifting from PEs to larger SIs."

This content was produced with the assistance of AI translation services.