PEFs prove their social value in numbers...employment and revenue double the national average

- Revenue up 12% p.a., employment up 9% at portfolio companies..2-3x the national corporate average

- Scaling R&D/CAPEX while executing financial strategies drives enterprise value gains and job stability

- Over 10x gap with global top-tier peers…specialization and overseas expansion needed in parallel

Korean companies backed by private equity funds (PEFs) recorded employment and revenue growth more than double the national corporate average. The figures show that PEFs are more than just providers of capital; they actively drive post-investment performance gains and additional hiring, generating tangible socio-economic benefits. According to Bain & Company's analysis, 304 portfolio companies managed by 13 leading PEFs achieved a 12% compound annual revenue growth (CAGR) and 11% annual export growth over the past 20 years - roughly three to four times higher than the average revenue and manufacturing export growth of 4% and of 3%, respectively, across all Korean companies over the same period. Employment indicators also far outperformed the national average. Headcount at PEF-backed portfolio companies grew 9% per year, more than double the national corporate average of 3% during the same period, while wages likewise rose 9% annually, demonstrating positive contributions to both the quantity and quality of jobs. Notably, full-time employees accounted for 94% of the workforce at PEF-invested firms, well above the industry average of some 60%, underscoring gains in job quality as well as quantity.

On November 12, Bain & Company released a report titled, "The Korean Private Equity Fund Industry: Current Status and Future Challenges." The analysis was undertaken to provide a balanced perspective on how PEFs have evolved into a standalone industry over the past two decades, the roles they have played and the direction and challenges that lie ahead.

◇ USD 122B in cumulative capital supplied primarily to SMEs and mid-sized firms…USD 57B focused on strategic industries

According to the report, Korea's PEF market has expanded to KRW 154 trillion in committed capital, more than tripling over the past two decades. PEFs have evolved beyond a mere investment vehicle to become a pivotal force in the market, accounting for roughly 60% of domestic M&A transactions. They are increasingly regarded as a growth engine driving industry-wide expansion and restructuring fueled by private capital. The analysis attributes this quantitative and qualitative growth to PEFs' "active ownership" strategy. Even after the initial investment, PEFs provide portfolio companies with additional growth capital and operational capabilities to drive sustained growth and performance improvement. In practice, 17% of portfolio companies raised follow-on equity financing through paid-in capital increases, averaging KRW 69 billion per company. After investment, their R&D spending grew by 16% annually and CAPEX by 10%, illustrating a virtuous cycle of "value-up → growth → value realization" achieved in many cases.

Over the past two decades, PEFs have deployed cumulative USD 122 billion in capital, directed primarily toward small and mid-sized enterprises rather than large corporates, which is another testament to the funds' positive role. These investments have delivered more than financial returns; they have broadened the base of Korea's industrial ecosystem and laid the groundwork for stronger, more sustainable corporate growth. Investment has been particularly strong in strategic sectors that will define Korea's future competitiveness, including AI, semiconductors, biotech, defense, batteries and renewables. PEFs have executed 782 cumulative deals totaling USD 57 billion, demonstrating how private capital has proactively advanced national growth priorities by embracing high-risk, high-return investments. This represents a symbolic contribution, as the private sector has voluntarily assumed risks and helped drive innovation in future technologies that public resources alone could not easily support.

◇ Critical roles in industrial restructuring…"carve-out deals, engine for efficiency improvement"

PEFs have also served as catalysts for corporate restructuring during key turning points in Korea's industrial transformation. Some of the most representative cases involve 'carve-out' deals - separating non-core business units owned by large conglomerates and growing them into independent companies. A carve-out refers to the process of detaching a business division that either is a low priority or has limited synergy within the group, and establishing it as a standalone entity. When conglomerates face constraints in investing or expanding such divisions with their own resources, PEFs step in to acquire them and unlock new avenues for growth. After acquiring such businesses, PEFs have revitalized them through capital investment, operational efficiency improvements and strategies for entering new markets - fundamentally restructuring their business models and profit structure. As a result, these carved-out companies are able to make decisions more swiftly, allocate resources more effectively and pursue mid- to long-term growth strategies more proactively than when they were relatively peripheral units within large conglomerates.

The combined value of the top 50 carve-out deals in Korea amounts to approximately USD 15 billion, with PEFs accounting for more than 80% of large conglomerates' non-core business divestitures since 2019. This demonstrates that PEFs have evolved beyond being mere buyers of assets to become key agents of structural reform, reducing inefficiencies and reallocating resources.

◇ Korean PEFs still lag behind global players…"now, scaling up is critical"

For Korea's PEF industry to make its next leap forward, expanding scale is viewed as the most pressing task, given the sizable gap with leading global players. As of last year, Blackstone - the largest US asset manager - reported USD 1.1 trillion in assets under management (AUM), while Apollo and KKR followed with USD 750 billion and USD 638 billion, respectively. By comparison, the total committed capital in Korea's PEF market stands at KRW 154 trillion. Although the market is showing a clear growth trajectory, the gap with top-tier global firms remains significant. Another key priority is diversifying portfolios and accelerating global expansion. Market participants point to the need to move beyond the current buyout-heavy structure and expand into other asset classes such as infrastructure, real estate, credit and secondary funds. Building co-investment partnerships and strengthening local networks will be critical to sourcing more overseas deals. In addition, analysis suggests that, in a phase where acquisition prices rises, dedicated "value-up" teams are needed to leverage data and AI to systematize post-investment operational improvement and productivity gains in a phase where acquisition prices rise.

Wonpyo Choi, head of Bain & Company's Seoul office, said, "Korean PEFs have already become important growth partners for Korean industry, backed by proven performance figures. Now is the time to purse scale expansion, deepen expertise and enhance global networks in parallel, so they can make the leap to sustainable value creators."