Stic Investments shines with multi-strategy approach amid M&A chill

Buyout, growth capital and credit units all deliver; infrastructure push signals new frontier

Firm eyes 1 trillion won fund after landing scale-up mandate

Some buy, some sell, and others reload for the next deal. Even in the same M&A market, private equity fund managers pursue different strategies and post different results. [House Review] takes a close look at where major fund managers invested this year, what they achieved, and where they are looking next. [Editor's note]

South Korea's mergers and acquisitions market has been largely subdued this year. Prolonged high interest rates and a global economic slowdown have pushed major deals out of the investment banking sector, but Stic Investments has stayed busy even in the chill.

The firm's multi-asset management structure — anchored by three divisions covering buyouts, growth capital and credit — has been credited for the performance. While the buyout unit caught its breath, the growth capital and credit divisions kept deals flowing, and an affiliate completed a major infrastructure transaction, delivering balanced results across the board. With the firm also pushing ahead on a new 1 trillion won ($724 million) blind fund, the industry is already watching closely to see where Stic Investments moves next.

Growth capital unit uncovers quality deals, 1 trillion won fund on track

Stic Investments' growth capital division made notable strides this year. Using the 230 billion won blind fund Stic K Growth Private Equity — formed in 2023 — as its primary vehicle, the unit steadily added promising companies to its portfolio.

Early in the year it put 10 billion won into CnerG, an environmental raw-materials trading platform, then in May joined the 40 billion won Series C round of senior-care company Caring, notching a string of quality deals. The rapid pace of deployment pushed the fund's draw-down rate to around 60 percent. More recently, the division drew fresh market attention by forming a consortium to acquire the entire 47.59 percent stake in Kidsnote — a mobile communication platform for infants and toddlers — held by Kakao Investment.

RF Medical supports a hands-on workshop organized by the Korean Society of Ultrasound in Surgery this year, showcasing its thyroid radiofrequency ablation platform. [RF Medical website]

The division has also kept up the pace on exits from existing portfolio companies. RF Medical, a high-frequency medical device maker acquired in May 2019, has been put up for sale with Samjong KPMG appointed as the sell-side adviser.

The most notable development in the growth capital division this year, however, is its selection as a delegated fund manager for the second round of the indirect investment category under the National Growth Fund's scale-up program. The scale-up league — targeting investments in large growth-stage companies — carries no hard cap on fund size and comes with 200 billion won in policy capital, making competition among major managers fierce. Building on that mandate, the division plans to raise private capital and form a new 1 trillion won blind fund before year-end. It is currently collecting letters of commitment from institutional investors.

Credit fund No. 1 picks up pace; major infrastructure deal closes

The credit division has also been steadily building its track record. The approximately 430 billion won Stic Credit No. 1 Blind Fund, formed at the end of last year, continued to serve as its firepower this year. In June the division acquired 20 billion won worth of convertible bonds issued by genomics firm LabGenomics, and the following month completed a block deal to purchase 2.5 million shares — about 3.93 percent of Seojin System — held personally by the company's chief executive Jeon Dong-gyu for approximately 129.3 billion won.

The division had already demonstrated swift execution last year with consecutive investments in contact lens maker Interojo, cell and gene therapy developer Kolon TissueGene, and waste treatment company ECO Solutions. With two more deals added this year, the fund's draw-down rate has reached around 50 percent. At this pace, observers expect the credit division to exhaust its remaining dry powder before year-end and begin preparing a second credit blind fund next year.

Stic Alternative Asset Management — the firm's alternative investment subsidiary — also stood out, matching the credit division's activity. Working alongside Korea Investment Private Equity, it completed the acquisition of a 49 percent stake in SK Multi Utility and Ulsan GPS for 1.6 trillion won in June, executing the deal without a hitch.

Having demonstrated its capacity to handle large-scale infrastructure projects, Stic Investments has since established a dedicated infrastructure investment division and brought in a senior executive from KB Asset Management to round out the team. The next goal is to form an infrastructure-dedicated blind fund, using the deal as a springboard for a full-scale push into the alternative investment space.

After Crintopia, what's next? Buyout unit scouts additional deals

The buyout division — the firm's core engine — completed its first major buyout of the year in February, acquiring a 100 percent stake in laundry franchise Crintopia for 630 billion won. It is now focused on post-merger integration work to enhance the company's value.

The deal was funded by Stic Opportunity No. 3, a large blind fund worth 2 trillion won raised in 2023. After the Crintopia acquisition, the fund's draw-down rate climbed to the high-60 percent range. The buyout division plans to deploy its remaining dry powder into at least one large deal or one to two mid-sized deals before year-end.

The division has not confined its search to any particular sector. Instead, it is carefully evaluating potential targets on the basis of stable cash generation, long-term exit visibility and reasonable valuation. The industry is watching closely to see where Stic Investments directs its remaining firepower.

an@heraldcorp.com