MMP, a company specializing in advising the sale of small and medium-sized enterprises, is considered an emerging powerhouse in the domestic mergers and acquisitions (M&A) advisory market. Founded in 2022, it led the sale of control over consumer goods companies to major domestic private equity fund (PEF) operators, and has since continued to finalize transactions involving small and venture corporations.
In its third year of establishment last year, it successfully completed five transactions (including attracting investment), marking a 66% increase compared to the previous year. Excluding the major accounting firms Samil and Samsung KPMG, which dominate the domestic M&A advisory market, it matched the number of transactions with global investment banks (IB) Citigroup Global Markets and BDA Partners.
MMP's specialized strategy for small and medium-sized enterprise M&A has worked. MMP focuses primarily on advising the selling side for transactions under 1 billion won. I met with Kim Gyu-hyun, the CEO of MMP, recently at the office in Gangnam, Seoul, where he noted, “The number of small and medium-sized enterprise M&A transactions will continue to increase.” Han Man-hwi, a director at MMP, was also present.
According to MMP, the most significant share of transactions in the domestic M&A market, based on the number of deals, consists of small and medium-sized enterprise M&A transactions, which have transaction amounts under 1 billion won. In fact, out of 1,564 total M&A transactions conducted in the country from 2021 to 2023, 1,171 involved small and medium-sized enterprises.
CEO Kim stated, “Although they do not receive much attention compared to large-scale deals in the trillions of won, small and medium-sized enterprises are at the center of M&A transactions by count.” He explained that even Samil advised on 110 M&A deals last year, with each deal averaging around 1.2 billion won.
Kim, a 15-year veteran accountant who mainly conducts M&A advisory and corporate valuation at Deloitte Anjin and Milestone, anticipated the growth of the small and medium-sized enterprise M&A market early on. He also felt that many small and medium-sized enterprise M&A deals that were easily sold at low prices due to the pressure of larger deals were regrettable.
CEO Kim commented, “Selling a corporation is an event that happens rarely in the lives of founder CEOs, but it hasn't been appropriately valued many times.” He noted that buyers familiar with M&A transactions often pressure sellers during due diligence and prolong negotiations, which creates a disadvantage for the sellers.
MMP's growth strategy is focused on representing the sellers. Instead of hastily making sales, it chooses good corporations that can be sold and provides long-term support. In the case of the accessory fashion brand IrRoom Design Skin, the transaction took nearly three years from the first meeting with the CEO to the completion of the M&A transaction, completed in February of this year.
CEO Kim stated, “The role of an advisory firm is not just to find good corporations to sell, but also to connect them with buyers who can nurture those companies.” He added that helping founder CEOs manage their emotions during a prolonged negotiation, akin to a roller coaster, is also a significant task.
To address the significant challenge of finding buyers for small and medium-sized enterprise M&A, MMP has established a separate 'deal table.' Its research team has built a database (DB) on corporate financial information, sale/acquisition needs, potential acquirers, and M&A deal cases to enhance the likelihood of closing transactions.
Director Han noted, “As of the end of last month, a database has been built that includes 947 potential selling candidates and 1,586 potential acquirers, along with various M&A-related information.” He remarked that, based on this database, MMP is also currently engaged in advisory services for venture companies, commonly referred to as startups.
CEO Kim believes that the small and medium-sized enterprise M&A market will continue to grow steadily. This is due to an increasing number of companies that cannot manage succession because of aging founders and a declining population. The Korea SMEs & Startups Institute (KOSI) has estimated that 20% of domestic manufacturing small and medium-sized enterprises have no successors.
Government policy support is also expected to boost the small and medium-sized enterprise M&A market. The government plans to expand the current concept of familial succession to corporate succession for the ongoing management of small and medium-sized enterprises facing difficulties in succession, and is expected to propose a special corporate succession law within the year. These proposals will likely include financial support for third-party business acquisitions.
Director Han commented, “There are actually more cases than expected where individuals persuade their fathers to sell the small business they inherited, in order to live their own lives.” He mentioned that in Japan, where aging began earlier, small and medium-sized enterprise M&A has been active for over 15 years, resulting in the emergence of publicly listed advisory firms with valuation in the trillions of won.
MMP aims to establish itself as a partner for small and medium-sized enterprise M&A and hopes to achieve a scale similar to that of Japan M&A Center. Japan M&A Center has consistently grown by specializing in domestic small and medium-sized enterprise M&A advisory, generating over 3.5 billion won in revenue annually. It is also listed on the Japanese stock market.
CEO Kim stated, “Small and medium-sized enterprises account for 99% of all corporations in our country, 81% of employment, and 65% of added value, making them a key pillar of the Korean economy.” He expressed a desire to provide good exit opportunities for small and medium-sized enterprise founders and to continue generating transactions that contribute to future company growth and development.