MMP, a firm specializing in advising on sales of small and medium-sized corporations, is regarded as an emerging powerhouse in the domestic mergers and acquisitions (M&A) advisory market. It led the sale of management rights of consumer goods corporations to major domestic private equity firms (PEFs) as soon as it was founded in 2022, and since then it has closed successive small and venture corporation M&A transactions.
In its third year since establishment, last year it completed five transactions (including fundraising). That was a 66% increase from the previous year, and, excluding the large accounting firms Samil PwC and Samseong KPMG, which dominate the domestic M&A advisory market, its deal count was on par with global investment bank Citi Global Markets Securities and BDA Partners.
MMP's specialized strategy for small and medium-sized corporation M&A paid off. MMP mainly advises on sell-side deals with transaction amounts under 100 billion won. I recently met Kim Gyu-hyun, MMP CEO, in the firm's office in Gangnam District, Seoul; Han Man-hwi, MMP director, also attended.
According to MMP, the largest share by number of deals in the domestic M&A market consists of small and medium-sized corporation M&A deals with transaction amounts under 100 billion won. In fact, of the 1,564 total M&A transactions in Korea from 2021 to 2023, 1,171 were small and medium-sized corporation M&A.
Kim said, "Compared with the so-called trillion-won big deals, they just receive less attention, but by number of M&A cases the center of transactions is small and medium-sized corporation M&A," adding, "Even Samil PwC advised on 110 M&A deals last year, and the average deal size per case is around 120 billion won, slightly above 100 billion won."
Kim, a 15-year accountant who mainly provided M&A advisory and corporate valuation at Deloitte Anjin and Milestone, anticipated growth in the small and medium-sized corporation M&A market early on. He also felt it was a shame that some small and medium-sized corporation M&A deals were sold cheaply because they were pushed aside by large deals.
Kim said, "Selling a corporation is a once-in-a-lifetime event for founder CEOs, but they have seldom received proper valuation," adding, "Buyers familiar with M&A transactions use due diligence to hassle and negotiation to buy time, and there was an aspect of sellers not being able to stand up to that."
MMP's growth strategy is solely on the sell-side. Instead, it selects corporations likely to be sellable and supports them for a long time. In the case of the sale of management rights of an accessory fashion brand that closed in February this year, it took nearly three years from the first meeting with the CEO to the M&A transaction closing.
Kim said, "What an advisory firm does is not simply find good corporations to put on the market and connect them with buyers who will grow them;" he added, "It is also a big task to steady the psychology of founder CEOs riding a roller coaster during long negotiations and to help the business perform well."
To focus on small and medium-sized corporation M&A where finding buyers is the biggest difficulty, MMP built a separate "deal table." Its in-house research team built a database of corporations' financial information, sell-side and buy-side needs, potential acquisition candidates, M&A deal cases, and other items to increase the probability of transaction success.
Director Han said, "As of the end of last month, a variety of M&A-related information is built into the database, including 947 potential sell-side candidate corporations and 1,586 acquisition candidates," adding, "Based on the database, we have recently been advising on sales of venture corporations, known as startups, in addition to small and medium-sized corporation M&A."
Kim expects the small and medium-sized corporation M&A market to continue to grow. He cited reasons such as founder aging and population decline, which increase the number of corporations that cannot achieve succession. The Korea SMEs & Startups Institute (KOSI) estimated that 20% of domestic manufacturing small and medium-sized corporations have no successor.
Government policy support also appears likely to grow the small and medium-sized corporation M&A market. The government plans to expand the current concept of family succession in business succession to corporate succession for the continued operation of corporations that find succession difficult, and to propose a special corporate succession law within the year. It is expected to include benefits such as financial support for third-party corporate acquisitions.
Director Han said, "There are more cases than expected in which, instead of inheriting the small and medium-sized corporation their father built, children persuade their fathers to sell so they can live their own lives," adding, "In Japan, where aging started earlier, small and medium-sized corporation M&A has already been active for 15 years, and an advisory listed company with trillion-won-valued M&A fees has appeared."
MMP aims to establish itself as a partner for small and medium-sized corporation M&A and someday reach the scale of Japan M&A Center. Japan M&A Center steadily grew with a strategy specializing in advising on local small and medium-sized corporation M&A and became a corporation with annual sales exceeding 350 billion won. It is also listed on the Japanese stock market.
Kim said, "Small and medium-sized corporations are the key actors of the Korean economy, accounting for 99% of all corporations, 81% of employment and 65% of value added," adding, "We want to continue to create transactions that provide founder CEOs with good exit opportunities while allowing the companies to grow and develop."