This article was published on March 21, 2025, at 4:26 p.m. on the ChosunBiz MoneyMove site.
The National Pension Service recently confirmed its investment in the MBK Partners blind fund, stating it would not make the investment if "hostile M&A" is pursued, raising questions about how to define "hostile M&A."
The National Pension Service went through a process of gathering opinions from industry stakeholders for the drafting of the contract with MBK, during which it considered including language stating it would not invest in cases of "M&A opposed by the chief executive officer of the target company." However, it is reported that this was ultimately discarded due to concerns that it could excessively restrict investment activities and diverged from the definition of hostile M&A.
According to investment banking (IB) industry sources on the 21st, the National Pension Service sought the opinions of major private equity fund (PEF) managers on what language to include in the contract before confirming its investment in MBK's sixth blind fund last month.
Among the options reviewed by the National Pension Service at the time was a proposal to refuse investment in "M&A opposed by the board of directors of the target company," or "M&A opposed by the chief executive officer."
A private equity source stated, "Ultimately, the National Pension Service struggled with how to define hostile M&A, but I understand they concluded that determining whether it is hostile M&A based on the approval or opposition of the CEO or board of directors is inappropriate." They added, "The National Pension Service itself has not established guidelines on how to define hostile M&A."
Another private equity source explained, "If we define the opposition to M&A by the 'board of directors,' it makes some sense; however, many CEOs are often professional managers and not major shareholders. It doesn’t make sense that if such a CEO opposes it, it would be classified as hostile M&A, preventing the National Pension Service’s investment."
While the IB industry has stipulated that it will not invest in hostile M&A, there are concerns that it has not been able to define the scope of hostile M&A. In the case of Korea Zinc, which has been experiencing a management dispute for six months since last year, it is argued that Chairman Choi Yoon-beom considers Young Poong and MBK Partners to be a "hostile M&A force," but there is also significant counter-argument that it cannot be viewed as hostile M&A since Young Poong is the largest shareholder.
An industry source from the IB sector said, "As more institutions are bound to follow the National Pension Service in excluding investments in hostile M&A, there is a need for a swift establishment of conceptual definitions and guidelines. This is not just an issue affecting MBK Partners; it could impact the entire private equity sector."
Recently, the Korea Nuclear Environment Agency's radioactive waste management fund also confirmed its investment of 25 billion won in MBK Partners' sixth blind fund, stating a clause that it would not participate in investments in hostile M&A.