South Korea’s private equity market has undergone major growth and transformation since the 2004 regulatory reforms, with independent firms increasingly shaping the investment landscape. This evolution has been accelerated by large conglomerates streamlining their operations, creating space for PE funds to acquire non-core assets. While capital commitments remain strong, deal activity has become more selective, reflecting caution amid economic and geopolitical uncertainty. The Hahn & Co. acquisition of SK Specialty captures many of these dynamics, showing how firms are targeting strategic sectors like semiconductors, seeking long-term value, and adapting to shifting market and trade conditions. At the same time, the growing influence of government policy and global trade tensions highlights how external forces are becoming increasingly central to investment strategy and exit planning.
Introduction
South Korea’s private equity (PE) market has undergone a dramatic transformation over the past two decades. This shift begain with a key regulatory milestone: the December 2004 amendment to the Indirect Investment Asset Management Business Act, which legalized the formation of private equity funds (PEFs) under a new regulatory framework. Prior to this, only a few institutional channels could engage in private equity activity, while the 2004 amendment created a clear legal structure for PEFs, allowing both institutional and qualified investors to pool capital for unlisted investments.
Since then, the sector has seen compound annual growth rates of 20.6% in total fund size and 27.1% in the number of PEFs between 2005 and 2023. This expansion has been driven largely by the emergence of independent PE firms, which are investment management companies not affiliated with traditional banking groups or chaebols (Korean conglomerates). More specifically, operating autonomously these firms have steadily gained market share, rising from 48.6% in 2007 to 74.9% in 2023.
As private equity firms became more established and capitalized in Korea, their role in the economy continued to expand, particularly in the aftermath of the global financial crisis. More specifically, PE firms began to play a pivotal role in the restructuring of Korean conglomerates, acquiring non-core businesses and supporting capital raising efforts. To quantify this growth, in the early 2010s PE accounted for less than 10% of M&A activity, but that figure has since grown to over 30% of both deal volume and transaction value, underlining the industry’s growing strategic influence in Korea’s M&A landscape.
South Korea’s private equity (PE) market has undergone a dramatic transformation over the past two decades. This shift begain with a key regulatory milestone: the December 2004 amendment to the Indirect Investment Asset Management Business Act, which legalized the formation of private equity funds (PEFs) under a new regulatory framework. Prior to this, only a few institutional channels could engage in private equity activity, while the 2004 amendment created a clear legal structure for PEFs, allowing both institutional and qualified investors to pool capital for unlisted investments.
Since then, the sector has seen compound annual growth rates of 20.6% in total fund size and 27.1% in the number of PEFs between 2005 and 2023. This expansion has been driven largely by the emergence of independent PE firms, which are investment management companies not affiliated with traditional banking groups or chaebols (Korean conglomerates). More specifically, operating autonomously these firms have steadily gained market share, rising from 48.6% in 2007 to 74.9% in 2023.
As private equity firms became more established and capitalized in Korea, their role in the economy continued to expand, particularly in the aftermath of the global financial crisis. More specifically, PE firms began to play a pivotal role in the restructuring of Korean conglomerates, acquiring non-core businesses and supporting capital raising efforts. To quantify this growth, in the early 2010s PE accounted for less than 10% of M&A activity, but that figure has since grown to over 30% of both deal volume and transaction value, underlining the industry’s growing strategic influence in Korea’s M&A landscape.
Chaebol Restructuring as a Catalyst for Private Equity
South Korea's top four conglomerates - Samsung, SK Group, Hyundai Motors, and LG - account for nearly 40% of the country’s GDP. In recent years, they have intensified restructuring efforts in response to external pressures, including rising competition from China and the threat of U.S. tariffs. A major concern is losing ground in critical technologies such as semiconductors, South Korea’s leading export. With manufacturing jobs and R&D sentiment at 12-year lows, and exports down 4.7% year-on-year in early 2025, conglomerates are increasingly focused on streamlining operations and strengthening core business lines.
As a result, these groups are selectively divesting non-core assets, creating acquisition opportunities for private equity firms. The current wave of restructuring is largely defensive, aimed at maintaining competitiveness and liquidity rather than signaling distress. For example, SK Group, South Korea’s second-largest conglomerate by assets, reduced its number of business units from 716 to 660 in the first nine months of 2024, selling its car rental, specialty gas, and polyurethane subsidiaries to PE buyers.
Despite growing activity, the number of attractive assets reaching the market remains limited. At the same time, PE firms are well-capitalized, with substantial dry powder ready to deploy. This dynamic gives sellers bargaining power to secure acceptable valuations as conglomerates are restructuring, but not yet under pressure to sell at any price.
Numerical Trends in South Korea’s Private Equity Market
South Korea’s private equity sector, while supported by a strong capital base, has experienced uneven trends in deal activity. From US$38.97 billion in 2017, assets under management (AUM) are projected to reach US$181.65 billion in 2025E, underscoring sustained investor confidence and growing interest from both domestic institutions and international players, including sovereign funds from the Middle East.
Exhibit 1: Private Equity Assets under Management in South Korea (in billions USD)
However, this growth in capital has not been matched by a consistent rise in deal values. With the exception of a sharp spike in 2021 (US$26.31 billion), annual deal value has remained relatively flat, fluctuating between US$13 and US$16 billion from 2017 to 2025E. This suggests that while funds are being raised at a record pace, deployment is still measured, constrained by global economic uncertainty and interest rate volatility.
Exhibit 2: Private Equity Deal Value in South Korea (in billions USD)
To better understand the outlook, a scenario forecast for 2023–2025E estimates that deal values could range from US$13.32 billion (conservative) to US$17 billion (optimistic) as shown below. These projections depend on several key factors such as regulatory reforms aimed at streamlining M&A, macroeconomic stability (including interest rate normalization), and sectoral tailwinds particularly in technology, healthcare and ESG-focused assets.
Exhibit 3: Private Equity Deal Value in South Korea Scenario Analysis (in billions USD)
Beyond overall deal value, transaction volume offers additional insight into investor behavior. The number of deals fell sharply from 197 in 2021 to just 83 in 2024, with a slight rebound projected in 2025E. This shift suggests that investors are becoming more selective, prioritizing due diligence and long-term strategic fit over transaction volume.
Exhibit 4: Private Equity Number of Deals in South Korea (in billions USD)
Despite short-term challenges, South Korea's private equity market presents strong fundamentals for long-term growth. The combination of rising AUM and selective deal-making suggests a maturing market with a shift toward quality over quantity. With global dry powder reaching record levels, South Korea remains a strategic destination for investors, especially in sectors aligned with digital transformation, healthcare innovation, and ESG goals.
Case Study: Hahn & Co.'s Acquisition of SK Specialty - A Strategic Bet on Semiconductor Production
Hanh & Co. Overview
Hahn & Co is one of the largest Korean private equity funds, founded in 2010 and based in Seoul. The firm currently manages $27B in assets, with a portfolio including 15 active investments across various sectors. Hahn & Co’s approach focuses mainly on Korean companies; however, the fund has also made some notable investments in Chinese companies. The fund operates with a flexible investment strategy, investing in industries such as: environmentally friendly solutions, healthcare, air travel, consumer and industrial goods and technology. Hahn & Co is recognized for its ability to identify and support emerging companies with immense growth potential, as demonstrated by investments in sustainability and digital transformation.
Regarding exit strategies, Hahn & Co. demonstrates a balanced approach, with 50% of exits carried out through M&A operations, and 33.3% of the total number of exits executed through Initial Public Offerings.
Since 2010, Hahn & Co has completed 35 investment rounds, with an average holding time of 3.7 years, underlining the ability of the fund to promptly create liquidity for its investors. The firm’s investments rounds are mainly private equity rounds; however, Hahn & Co has also participated in some growth and series A funding rounds. This enabled the firm to capture value at different stages of the company’s life cycle, from early-stage growth rounds to more established targets.
Two notable funds managed by the firm are Hahn & Co Private Equity Fund I, seeking investment opportunities in South Korea, China and Hong Kong in a variety of sectors targeting medium and large buyout deals, and Hahn & Co. Core I that targets solely companies located in South Korea operating in a broad range of sectors and industries, providing financing for buyout transactions.
SK Specialty Overview
SK Specialty Co Ltd. (formerly SK Materials Co Ltd.) is a South Korean company specialized in the production of high-purity industrial gases and chemicals used in the production of semiconductors, displays and solar cells. The company was founded in 1982, it’s currently owned by SK Inc. and its CEO is Kim Yang Taek.
The core business segments of SK Specialty Co Ltd. are the production of high-purity gases used in many different processes as cleaning gases (Nitrogen trifluoride NF₃), etching gases and deposition gases used in the production of semiconductors. SK Specialty also supplies gases and chemicals used in the production of displays and solar cells, contributing to the advancement of renewable energy technologies. Moreover, the company’s primary revenue streams include long-term supply contracts with domestic giants of the semiconductor industry such as Samsung Electronics and SK Hynix.
To maintain its competitive advantage, SK Specialty invests heavily in R&D—allocating 3.3% of its 2022 revenues—focusing on specialized materials and chemicals while improving existing products. This strategy supports the company’s ability to meet the growing demand for semiconductors and components used in renewable energy production.
Looking at the financials of SK Specialty Co Ltd. for FY2023 (Data for FY2024 has not been released yet), the company has seen a decline in net sales revenue and ROS, inverting the positive trend of the last 4 years, facing also a severe reduction in profits. This opens the possibility for optimization and increased profitability thanks to a growing demand for semiconductors worldwide.
Exhibit 5: Financial Metrics for SK Specialty (in Millions of Korean Won)
Deal structure
The acquisition of SK Specialty by Hahn & Co. represents a well-structured private equity transaction that balances strategic control, financial flexibility, and long-term value creation. By acquiring an 85% majority stake, Hahn & Co. assumed the role of primary decision-maker, while SK Group retained a 15% interest to ensure continued alignment and collaboration between the two businesses.
The value depreciation from 4.3 trillion KRW to 3.2 trillion KRW at the time of the transaction reflects a broader shift in market conditions that Hahn & Co. strategically leveraged. This decline in valuation was driven by a combination of interrelated factors, including a slowdown in the semiconductor industry, global supply chain disruptions, and volatility in energy prices. These challenges led to more conservative projections of future cash flows and, ultimately, a lower enterprise value. By acting during this period of uncertainty, Hahn & Co. was able to acquire a high-potential asset at a discounted price—demonstrating its ability to identify fundamentally sound businesses temporarily undervalued by the market.
One of the key structural strengths of the deal lies in the financial flexibility it provides for both parties. For Hahn & Co., the acquisition represents a long-term bet on a high-growth sector, offering the opportunity to enhance SK Specialty’s operational efficiency and production capacity. At the same time, SK Group benefits from immediate liquidity, which can be reinvested into its core businesses, particularly in semiconductors and battery production, to maintain and grow its competitive edge.
Deal rationale
SK Specialty holds a dominant position in the global market for specialty gases, particularly nitrogen fluoride (NF₃), which is essential to semiconductor manufacturing. With a 40% share of the global NF₃ market, the company plays a critical role in the semiconductor supply chain-making it a highly strategic target for investment. This aligns directly with Hahn & Co.’s objective of backing businesses in sectors with strong, long-term growth potential. By acquiring a majority stake in SK Specialty, Hahn & Co. not only gains exposure to the expanding semiconductor industry but also brings in its operational expertise to scale the business and unlock further value. As a result, the investment is expected to strengthen SK Specialty’s capabilities while also generating returns for Hahn & Co.’s limited partners through enhanced efficiency and liquidity.
For SK Group, the transaction represents a step of a larger restructuring plan aimed at optimizing the Group’s portfolio and strengthening its financial position. The liquidity obtained by the sale is projected to be used in core business areas such as semiconductor and secondary batteries production.
Despite the sale, SK Group’s decision to retain a 15% stake in SK Specialty underscores the strategic link between specialty gas production and semiconductor manufacturing. This is particularly relevant given that SK Hynix-one of the world’s leading chipmakers-is part of the SK Group and a key customer of SK Specialty.
To conclude, for SK Group the transaction represents an opportunity to redirect liquidity to core businesses while maintaining strong relationships with SK Specialty for the supply of chemicals directly used in their core operations, therefore generating liquidity without losing the synergic relationship with the gas supplier. For Hahn & Co. the transaction represents an opportunity to invest and capitalize in a growing sector, by taking control of one of the key suppliers of gases for the global chipmaking industry.
Impact of trade policies on the acquisition
Hahn & Co.'s control of SK Specialty is influenced not only by financial considerations, but also by broader external factors such as South Korean and international trade policies. These policies shape supply chains, investment flows, and regulatory frameworks, all of which will play a critical role in determining the long-term success of the acquisition.
One major consideration is South Korea’s government-led strategy to strengthen its domestic semiconductor ecosystem. Through tax incentives for chip makers and material suppliers, subsidies for research and development, and strict foreign investment screening regulations, the government aims to maintain national control over key technologies. In parallel, SK Specialty’s international operations are shaped by global trade tensions—particularly between the U.S. and China. Measures such as the U.S. CHIPS and Science Act, which subsidizes domestic manufacturing while restricting tech exports to China, could limit SK Specialty’s ability to serve major export markets. Meanwhile, China’s push for semiconductor self-sufficiency and its restrictions on imports of raw materials could reduce its reliance on South Korean suppliers, weakening SK Specialty’s position in one of its key markets.
Trade policy will also have direct implications for Hahn & Co.'s potential exit strategy. Depending on how global trade dynamics evolve, SK Specialty may be better suited for a domestic or regional IPO, particularly in South Korea or Hong Kong, where semiconductor-related companies are currently receiving strong valuations. Alternatively, a sale to a multinational semiconductor firm may be considered, though this would likely involve navigating complex regulatory scrutiny and cross-border investment restrictions. Given these uncertainties, Hahn & Co. may also choose to extend its holding period, waiting for a more favorable geopolitical and regulatory environment to maximize exit value.
Conclusion
South Korea’s private equity market has grown rapidly over the past two decades, supported by regulatory reforms, increased capital, and opportunities arising from chaebol restructuring. Despite recent market challenges, strong fundamentals and rising AUM confirm its long-term potential. The acquisition of SK Specialty by Hahn & Co. highlights key trends shaping the industry: strategic asset selection, value creation through operational improvements, and exposure to high-growth sectors like semiconductors. At the same time, it reflects how trade policies and global tensions are increasingly relevant in shaping deal outcomes and exit strategies. Together, these elements illustrate the evolution of Korean private equity into a more selective and mature market.
By Davide Franchini, Moritz Luther, Gregorio Perini, Jennifer Povolotskaya
Sources:
- Jipyong LLC
- The Investor
- BusinessKorea
- FactSet
- Statista
- Refinitiv
- Business Insider
- Financial Times
- Private Equity Wire
- Korea Capital Market Institute
- The Korea Economic Daily