This article was published on Jan. 21, 2025, at 4:02 p.m. on the ChosunBiz MoneyMove site.
The sale of management rights of Seorin Company, known for its K-beauty brand "Round Lab," has returned to square one. CVC Capital, a private equity firm, has relinquished its status as the preferred bidder, and it has been confirmed that Gudai Global, which was considered the next major bidder, has withdrawn from the acquisition.
According to the investment banking (IB) industry on the 21st, Gudai Global has recently confirmed its decision to withdraw from the Seorin Company acquisition. About three months after forming a consortium with Company K Partners, a venture capital firm, in October of last year, and being listed as a preliminary acquisition candidate.
The acquisition target was 100% equity put up by Calyps Capital and Meritz Securities just a year after acquiring Seorin Company. The two firms selected Bank of America (BofA) as the lead underwriter in July and sought to sell the management rights. In particular, reflecting the recent popularity of global K-beauty, they hoped for a valuation of 800 billion won.
Gudai Global and Company K have attracted significant market attention as strong candidates from the beginning of the Seorin Company acquisition. Gudai Global, which rose to prominence as "Miss Korea", acquired three brands just last year, establishing itself as a 'big player' in domestic cosmetics mergers and acquisitions (M&A), and Company K's move toward financial investment contributed to this.
Market interest has heightened this year. This is because CVC Capital, which had proposed an acquisition price of about 800 billion won in December last year and had been designated as the preferred bidder, chose to halt the transaction. The market quickly identified Gudai Global and Company K as the next preferred negotiators, as rumors circulated that they had submitted a price in the mid-700 billion won range.
However, Gudai Global and Company K appear to have determined that the valuation of Seorin Company is excessively high. While the "1025 Dokdo Toner" presented by the Round Lab brand gained popularity, exceeding 100 billion won in sales for 2023, there are calculations suggesting that an 800 billion won valuation is too much. The claim of a mid-700 billion won price proposal was also reported to be inaccurate.
Gudai Global and Company K confirmed that they had proposed a valuation of less than 600 billion won for Seorin Company when participating in the preliminary bidding in October last year. Considering that Seorin Company's estimated EBITDA for last year was about 80 billion won, this level corresponds to a multiple of about seven times.
The recent transformation of the cosmetics M&A market into a buyer's market, characterized by an oversupply, has also prompted Gudai Global and Company K to turn away from Seorin Company. As founders and representatives of small and indie K-beauty brands have increasingly opted for exits, there has been a rise in available brands and a decrease in their valuations.
Currently, domestic cosmetics small and indie brand operators are sequentially pushing to sell their management equity. According to accounting firms, it is estimated that more than ten firms have selected advisors for the sale and are seeking potential buyers.
Gudai Global and Company K are looking for alternative K-beauty brands to replace Seorin Company. In particular, both companies are expected to maintain their consortium of strategic investors and financial investors, with a focus on brands that have brand recognition and significant growth potential.
Meanwhile, Calyps Capital and Meritz Securities find themselves in a position where they must re-enter the search for new buyers for Seorin Company. However, there are observations suggesting that securing acquisition candidates at the 800 billion won valuation will not be easy. It is also a point of interest whether the selling side will continue to keep BofA as the sale's lead underwriter.