The domestic private equity (PE) market in South Korea has been severely impacted by the controversy surrounding MBK Partners, leading to a sharp decline in investor sentiment. Major limited partners (LPs), including the National Pension Service, have completely halted new investments, and the combination of high interest rates and volatility in the domestic stock market has further dampened M&A activities among local PEFs.
According to a report released on August 20 by Samjong KPMG, titled 'Global PE Investment Trends and Outlook for the Second Half of 2026,' the total amount of PE investment in South Korea for the first half of 2026 was $5.6 billion, with only 69 deals recorded. This represents a mere 8.3% share of the overall PE investment market in the Asia-Pacific region. In contrast, South Korea's market share had exceeded 11-14% from 2018 to 2022, indicating a significant downturn in domestic PE investment activities.
The primary reason for the sluggish domestic PE market has been identified as the suspension of new domestic PE investments by major LPs, including the National Pension Service, due to the fallout from the MBK controversy. Additionally, global economic uncertainties and rising borrowing costs have negatively affected control acquisition transactions in the domestic PE sector.
Conversely, as the high exchange rate persists, global PE firms with substantial capital have increased their acquisitions of quality domestic assets. The report notes that as more companies consider selling non-core assets amid the high exchange rate, foreign PE firms with ample capital are selectively investing in high-skilled precision manufacturing sectors, such as semiconductors and automotive parts, as well as K-beauty and K-culture export companies.
Industry experts believe that the recovery of the domestic PE market in the second half of this year will depend on whether major LPs, including pension funds and mutual aid associations, resume their investment activities.
Samjong KPMG stated, 'Plans for investments by pension funds and mutual aid associations are scheduled for the second half of 2026, indicating a potential for recovery in domestic PE investment.' They also predicted that interest from domestic and foreign PE firms would expand beyond traditional buyouts into various investment areas.
* This article has been translated by AI.
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