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Michael ByungJu Kim, founder and Chairman of MBK Partners North Asia-focused MBK Partners has closed a $1.18 billion deal to sell its 12.5% stake to New York-based Dyal Capital at a valuation of $9.5 billion, according to people with knowledge of the matter on Tuesday.The stake deal brought MBK's value on par with that of TPG Inc. and propelled it to Asia's most valuable PE house. TPG, one of the world's top five PE giants, went public on Nasdaq in January of this year. The deal size was disclosed when both MBK and Dyal explained the transaction to their limited partners (LPs). Among Asia-based PE firms, MBK's corporate value is higher than the €6.8 billion ($7.5 billion) valuation of Baring Private Equity Asia, pinned by EQT Partners. Europe's largest private equity firm EQT agreed last week to acquire Baring PEA, one of Asia's three largest PE firms.In terms of assets under management (AUM), MBK is already Asia's largest independent PE house, with about 30 in-house investment managers.Its AUM has grown by 29% per year on average to $25.6 billion of late, compared with $1.18 billion in its first year in business in 2005. Over the past 17 years, MBK has exited 35 deals that delivered an internal rate of return (IRR) of 19% or higher. That far exceeded the PE industry's 8% threshold, or a minimum IRR required for PE houses to receive performance bonuses from LPs.PE houses' incomes are composed mainly of a management fee equivalent to 1-1.5% of the fund size they manage and performance bonuses at the time of a fund liquidation. Given the absence of tangible assets on its balance sheet except for portfolio companies, a PE firm's valuation reflects investors' evaluation of its capacity and capability of deal sourcing, portfolio management and exits, based on its track record and expertise of investment managers.GETTING BIGGERMBK's stake sale comes as global PE titans are bulking up their Asia-focused funds in search of higher returns.KKR & Co. closed its fourth Asia fund on $1.4 billion in April of last year. Blackstone Inc., the world's largest PE firm, is raising a $9 billion Asia-focused real estate fund. The Carlyle Group is working on its sixth Asia fund after it launched a $6.55 billion won Asia-dedicated fund in 2018."Private equity markets in Europe and North America combined had grown 14% over the past six years," said one of the sources. "By comparison, Asia's PE market expanded by 24% during the period. It's no wonder that the value of PE firms with expertise in Asia is going up." Dyal Capital is a unit of Neuberger Berman Group and focuses on minority equity investments in alternative asset management firms.Its stake purchase in MBK followed Stockholm-based EQT' €6.8 billion acquisition of Baring PEA, in which Dyal acquired a minority stake back in 2016. MBK was founded by a former Carlyle Group Asia head Michael ByungJu Kim in 2005. Its portfolio includes a Korean supermarket chain Homeplus; Lotte Card Co.; a home decor company Modern House; and Golfzone County, the country's largest golf course management firm.Last year, MBK achieved double-digit IRRs, or billion-dollar returns from three divestments in South Korea, China and Japan simultaneously. The three companies are Japan's Accordia Next Golf, China's Apex International Corp. and South Korea's Doosan Machine Tools. The three transactions ranked among the nine largest PE exit deals in the three countries in 2021.On the contrary, MBK has not yet exited from two Korean assets – D’Live, a cable TV operator and NEPA, an outdoor clothing firm – for a decade.By Jun-Ho Chachacha@hankyung.comYeonhee Kim edited this article
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