Recently, rumors have emerged regarding the acquisition of Kakao subsidiaries engaged in golf, entertainment, and mobility businesses by a private equity fund (PEF). Given the nature of private equity funds that aim to realize profits through resale after acquisition, large-scale restructuring is anticipated, leading to a growing voice of opposition from the Kakao labor union. There are concerns that a 'second Homeplus incident,' characterized by restructuring and bankruptcy crises following an acquisition by a private equity fund, may be replicated within Kakao subsidiaries.
◇ Kakao union firmly opposes private equity fund acquisition... concerns about the 'second Homeplus' incident
According to industry sources on the 11th, private equity funds are being mentioned as potential strong candidates for the acquisition of Kakao subsidiaries, including Kakao VX (screen golf), Kakao Entertainment, and Kakao Mobility, amid recent rumors of sales.
In response, on the 9th, the Crew Union, the Kakao community union, expressed opposition to the sale of Kakao's major subsidiaries to private equity funds. The Crew Union criticized, saying, "Both Kakao VX and Kakao Mobility have been reported as strong buyers for private equity funds," and noted, "As revealed in the recent corporate rehabilitation situation of Homeplus, private equity funds like MBK have no interest in social responsibility beyond investment profits."
The Kakao union's opposition to the private equity fund acquisition stems from concerns that entrusting the company to private equity funds could lead to job losses for employees. There are also numerous arguments that this could be a setback for the company's long-term growth.
A representative case is Homeplus. After private equity fund MBK Partners acquired Homeplus in 2015, they reduced approximately 5,000 employees at directly operated stores to cut expenses. Besides restructuring, the sale of 15 core stores at Homeplus led to a decline in sales and customer visits, weakening the company's competitiveness. It is known that the approximately 4 trillion won received from the sale of stores went into the private equity fund through dividends. As a result, Homeplus applied for court protection (corporate rehabilitation procedures) last month amid a bankruptcy crisis.
Park Sung-ui, the vice chair of the Crew Union, stated, "If the private equity fund acquires the company, large-scale workforce restructuring would be inevitable, and there are significant concerns that core assets of the company will be stripped away, leaving nothing but an empty shell, leading to a 'second Homeplus incident.'"
◇ Kakao subsidiaries in acquisition rumors, private equity funds hold certain equities
Kakao attempted to sell Kakao Mobility to private equity fund MBK Partners three years ago, but the deal fell through. However, rumors of sale have resurfaced recently. The company's second-largest shareholder is private equity fund Texas Pacific Group (TPG), which holds 29.04% equity. It is structured in a way that acquiring just a portion of Kakao's equity could elevate them to the position of largest shareholder.
Kakao Entertainment's largest shareholder is also Kakao, which holds 66.03% equity, but private equity fund Anchor Equity Partners (12.42%) is the second-largest shareholder. Recently, rumors of sale have emerged as it was revealed that Kakao sent letters to major shareholders of Kakao Entertainment to express their intent to sell. In March, it was made official in a business report that Kakao VX was in discussions with venture capital firm Murex Partners about acquiring Kakao VX. Although specific equity ratios have not been disclosed publicly, it is known that Kakao VX also has equity held by private equity funds.
An industry insider noted, "Kakao is restructuring non-core affiliates to focus on artificial intelligence (AI) and KakaoTalk, but if private equity funds are excluded as buyers, the speed of this restructuring may slow down. If a buyer offers a high price quickly, they will proceed with the sale of subsidiaries regardless of whether they are private equity funds." This insider added, "Private equity funds already hold certain equities and have monitored the company's management situation, so they are indeed in the most advantageous position in the bidding process."
◇ "Regulations must be established after private equity fund acquisition"
Experts say that regulations are needed to address the irregularities related to large-scale layoffs and the compensation of acquisition costs through the sale of core assets after private equity fund mergers and acquisitions. Kim Kyung-won, a distinguished professor at Sejong University's Department of Business Administration, stated, "Typically, private equity funds engage in workforce reductions to maximize capital efficiency after acquiring corporations. However, this leads to job losses, negatively impacting the national economic efficiency. Regulations are necessary to ensure employment is maintained for a few years after the acquisition, or that dividends realized through asset sales cannot be pursued to prevent social side effects."
He emphasized, "When considering the sale of subsidiaries, Kakao should prioritize reviewing companies in the same industry that can grow rather than just handing them over to private equity funds for money. Selling at a high price may yield immediate profits, but this could lead to a loss of public trust."
According to the Fair Trade Commission, Kakao currently has 116 subsidiaries as of February this year. This represents a decrease of 21.1% compared to May 2023 (147 companies). In response, Kakao stated, "While Kakao has consistently pursued the organization of its subsidiaries, many cases involved reducing the number of subsidiaries through mergers. As of yet, there have been no cases of sales to private equity funds."