Mbk Partners, a prominent private equity firm in Asia, was founded in 2005 by Michael ByungJu Kim and his team after they spun out from Carlyle. Since its inception, MBK Partners has successfully raised five buyout funds and two special situations funds, demonstrating consistent investor confidence. The firm’s latest endeavor, its sixth buyout fund, recently achieved a significant milestone with a second close of approximately USD 5 billion, progressing towards its overall target of USD 7 billion. With an impressive USD 31 billion of capital under management, MBK Partners strategically invests across the dynamic markets of China, Japan, and South Korea, solidifying its position as a key player in the Asian private equity landscape.
A recent interview provided insights into MBK Partners‘ perspectives on key themes shaping the Asian investment environment and their strategic approach.
Corporate Governance as a Driving Force in North Asian Markets
When considering the most prevalent themes for buyout investors in Asia, corporate governance emerges as a leading force, particularly in North Asia. This is especially pronounced in Japan, with Korea closely following suit. Policymakers in Korea have observed the positive transformations spurred by enhanced corporate governance in Japan, leading to more open and dynamic markets. This focus has significantly contributed to the private equity boom witnessed in the region. The tangible outcome has been a marked increase in transparency, accountability, and overall dynamism within the Japanese corporate system. MBK Partners recognizes the pivotal role of corporate governance in unlocking value and fostering sustainable growth within their investment portfolio.
Korea and Japan: Distinct Paths to Corporate Evolution
While both Korea and Japan share a conglomerate-heavy economic architecture, often referred to as “Inc.,” the manifestation of corporate governance themes differs. Family ownership remains more deeply entrenched in Korea, with the largest chaebols extending into their third and fourth generations of ownership. This presents unique structural hurdles compared to Japan. However, the overall trajectory is similar, with Korea demonstrating a dynamism that may even surpass Japan’s stability-seeking market, potentially leading to a faster pace of change. MBK Partners aims to be at the forefront of this evolution, actively participating as agents of change within the Korean market and leveraging their expertise in navigating complex ownership structures.
The Rise of Aged Care Investments in North Asia
The demographic shifts in North Asia, particularly the rapid aging of the population, present both societal challenges and significant investment opportunities. Japan, with 30% of its population over 65, leads the world in this demographic trend, while Korea also ranks among the top nations with aging populations. This demographic reality has profound implications for both society and the economy. For investors like MBK Partners, elderly healthcare emerges as a sector with immense potential. This conviction is reflected in MBK Partners‘ strategic acquisitions of Tsukui Holdings, Soyokaze, and Hitowa in Japan between 2021 and 2024. In Korea, their investments in Medit and Osstem Implant, companies specializing in dental scanning and implant technologies catering to middle to elderly age groups, further underscore their commitment to this sector. Beyond aged care, MBK Partners also identifies rising female workforce participation, increased leisure activities, and technological disruption, particularly AI, as key investment themes.
AI: A Transformative Force Across All Industries
The impact of Artificial Intelligence (AI) is a critical consideration for MBK Partners in all investment decisions. Recognizing AI’s pervasive influence, MBK Partners views every business as potentially becoming an “AI business.” The disruptive potential of AI is now an integral part of their review process for any acquisition or investment target. While acknowledging the significant disruptive impact of AI across industries, MBK Partners emphasizes the ongoing challenge of predicting the precise direction and magnitude of this disruption. They maintain a realistic perspective, stating that anyone claiming to have fully grasped AI’s impact on business is likely oversimplifying a complex and rapidly evolving landscape. MBK Partners is actively working to understand and integrate AI considerations into their investment strategies to navigate this transformative technological wave effectively.
Japan: A Cornerstone of Asian Investment Strategy
Geographically, Japan stands out as a primary focus for MBK Partners. When considering deploying substantial capital in Asia, Japan, followed by Korea, offers the most compelling opportunities, with Japan presenting a significantly larger market. While India’s importance is growing, it currently primarily offers growth capital opportunities, typically involving smaller cheque sizes. Japan’s appeal extends beyond deal flow; it also delivers strong returns, validating the investment thesis for the region. The robust legal system, reliable financial disclosures, transparent policymaking, and availability of leverage in Japan create an environment where “everything works,” allowing firms like MBK Partners to fully utilize their value creation tools. This makes Japan the closest equivalent to the US market within Asia, offering a stable and predictable investment landscape for MBK Partners.
Maintaining North Asia Focus and Avoiding Geographic Creep
Despite the temptation for geographic expansion seen among many investment managers, MBK Partners has deliberately maintained its North Asia focus. This strategic decision stems from deep experience in the region and a conviction that focusing on core markets allows for greater depth and expertise. Having observed the development of buyouts across Asia, MBK Partners recognized early on the potential of Korea and Japan, establishing a presence in China with a long-term perspective. While acknowledging recent challenges in China, MBK Partners remains committed to the region’s long-term potential, contrasting with firms retrenching or exiting the market. MBK Partners believes that ignoring China’s vast economy and opportunity set would be a strategic misstep, opting instead to patiently navigate the current landscape and capitalize on future recovery.
Competitive Dynamics and Talent Acquisition in Japan
The competitive landscape in Japan’s private equity market is evolving, with increased activity from global and pan-regional managers. This heightened competition is leading to a more crowded market and a “war for talent,” particularly for experienced investment professionals. MBK Partners‘ Tokyo office is experiencing significant growth, but recruiting associates, vice presidents, and directors is becoming increasingly challenging, reminiscent of the competitive dynamics seen in China 10-15 years ago. While MBK Partners has established a strong position in the mid-market, focusing on proprietary deals, rising competition and increasing auction processes are leading to concerns about potentially rising prices. Navigating this competitive environment and securing top talent are key priorities for MBK Partners in maintaining their edge in the Japanese market.
Addressing LP Concerns about China and DPI
MBK Partners proactively addresses Limited Partners’ (LPs) concerns regarding investments in China. Fund V allocated approximately 13% to China, nearly 50% to Korea, and the remainder to Japan, and Fund VI is expected to maintain a similar allocation, potentially with an even larger weighting towards Japan. MBK Partners emphasizes a cautious approach to China, having paused new investments there for three years and likely extending this pause. While acknowledging policy and geopolitical headwinds in China, MBK Partners reiterates its long-term belief in the market’s potential and maintains its presence, signaling a commitment to re-engage when conditions improve. Regarding Distribution to Paid-In (DPI), MBK Partners acknowledges the global decline in distributions but highlights ongoing asset sales and exits in their portfolio, including GP-to-GP transactions. Japan and Korea continue to provide robust leverage and liquidity, facilitating returns through recaps and navigating varied IPO market conditions in the region.
Prudent Approach to Continuation Vehicles and Cross-Fund Transactions
MBK Partners adopts a measured approach to continuation vehicles and cross-fund transactions, viewing them as exceptions rather than standard practice. They prioritize clean exits, expressing reservations about GP-led secondaries hindering this objective. Currently, MBK Partners is not exploring such deals across their buyout and special situations strategies, reflecting a preference for traditional exit routes. While acknowledging the existence of a market for GP-led secondaries, MBK Partners perceives it as becoming more challenging. Cross-fund continuity deals are also not considered a suitable strategy for MBK Partners, reinforcing their commitment to straightforward and transparent investment management practices.
Expertise and Value Creation in GP-to-GP Transactions
MBK Partners has engaged in GP-to-GP transactions, acquiring companies like Medit from UCK Partners and Alinamin Pharmaceutical and Geo-Young from Blackstone. They believe that the size of the selling GP is less relevant than the buyer’s sector expertise and value creation capabilities. MBK Partners‘ strength in healthcare, particularly consumer healthcare, aligns well with acquisitions like Alinamin and Geo-Young. Their confidence in creating further value in these businesses underscores their strategic approach to acquisitions, focusing on sector-specific expertise and operational enhancements.
Localisation, Scaling, and Centralized Decision-Making for Competitive Advantage
To maintain competitiveness in Asia’s dynamic buyout space, MBK Partners emphasizes localisation and scaling. They maintain substantial investment teams dedicated to each of Japan, Korea, and China, ensuring deep local market knowledge and deal sourcing capabilities. Focusing on these core markets allows MBK Partners to achieve both depth and economies of scale by centralizing functions such as LP relations, accounting, legal and compliance, IT, security, and human resources. A centralized investment committee further streamlines decision-making, enhancing efficiency and consistency across the firm’s operations. This combination of local expertise and centralized structure provides MBK Partners with a significant competitive advantage in the Asian private equity landscape.
Commitment to Private Equity and Strategic Focus
While the industry trend leans towards diversification into multiple strategies, MBK Partners remains committed to its core expertise as a private equity manager, focusing on buyouts and special situations. They believe in the complementarity of these strategies and their strategic focus on North Asia. MBK Partners anticipates industry consolidation, with global asset managers acquiring GPs and a potential shakeout within the industry, where some firms may struggle to fundraise. Despite these trends, MBK Partners expresses contentment with its independent status, prioritizing its focused approach and deep expertise within the Asian private equity market.
In conclusion, MBK Partners stands as a seasoned and strategically focused private equity firm, deeply rooted in the Asian market. Their commitment to North Asia, expertise in corporate governance and key sectors like healthcare and technology, and disciplined approach to market dynamics position them for continued success in the evolving private equity landscape. MBK Partners‘ emphasis on local expertise, operational value creation, and strategic focus underscores their enduring commitment to delivering strong returns for their investors and contributing to the growth of the Asian economies they operate within.
