Financial and corporate
Historically South Korea's M&A market is known for offering large targets within narrow windows of opportunity. It has also developed a reputation for protectionism, through a perceived anti-foreign takeover sentiment from regulators.
Recently though there has been a revival in the M&A market with private equity at the forefront. “Since the financial crisis in 2008 M&A decreased in number and size, but in the second half of last year the number of M&A deals increased,” one practitioner says.
In many cases, the increase in volume of M&A deals was spurred by an evolving body of small to medium-sized local private equity firms like Hahn & Co alongside established houses like MBK Partners.
There’s no doubt that South Korea’s private equity industry is growing, with the new crop targeting mid-sized companies and distressed assets. For example Visteon, the US automotive parts maker, is looking to sell its South Korean unit to a local private equity firm.
“Our financial crisis in the late 1990s brought in foreign investors to buy Korean assets, but this isn’t happening as much now,” one South Korean partner says. “It is a trend that private equity funds come from home-grown firms but the market is saturated and Korean companies are investing outside Korea.”
Despite this decline in foreign interest, there are some signs of growing confidence among overseas private equity players, which was seen recently when Tyco sold its South Korean home security business to Carlyle Group for $2 billion.
Overall it’s been a strong year for M&A in South Korea. In terms of volume the industrials and chemicals sector has been busy alongside the technology and financial services sectors. But the industries that have notched up the highest values are transport and consumer goods.
Energy and infrastructure
Similar to Japan, South Korea is a major importer of energy. It imports almost all of its oil and is the second largest importer of LNG in the world. Electricity generation in the country comes from thermal and nuclear power. And it is in these areas where law firms have developed regular and wide experience. In the past 12 months there has been activity in the corporate space with ownership changing hands. For example, POSCO Energy acquired 100% of Tongyang Power’s - a coal power plant company - stocks for $393 million, and GS Holdings acquired 71.9% of STX Energy’s shares from Buffalo E&P for $575 million.
Traditionally the country has placed a heavy emphasis on nuclear power although more recently there has been an inclination towards renewable energy in solar, wind and biofuels. “We’ve seen an increase in renewable energy,” one practitioner says. “The government changed the feed-in tariff to an RPS system and brought in a penalty for failing to meet its requirement.” The future of its economy depends on how it balances energy security with environmental concerns, and the country’s recent documentation scandal that escalated into a corruption fracas between the state-owned nuclear company, the industry, and within the government itself dented public confidence in a post-Fukushima age. There was also a recent trend – thanks to Japan’s attractive feed-in tariff – for Korean investors to invest in solar power plants in Japan.
As a developed market, a lot of work in South Korea is outbound utilising the expertise of Korean companies in emerging markets. “Generally there’s not a lot of infrastructure activity in Korea, so investors go out to focus on less developed nations such as the Philippines and in places in Africa and the Middle East,” one partner says. Most of these outbound projects are in hard infrastructure, focusing on toll roads, bridges, ports and railways - of course South Korea has developed rich experience in implementing public-private-partnerships (PPP).
Domestically, the development of a new smart city, Songdo, is drawing to a close. It has been hailed as the city of the future at a cost of $40 billion, and is the largest private real estate development in history with the most cutting-edge infrastructure as part of day-to-day life.
The legal market in South Korea is independent, strong and stable, with a core of large self-confident domestic firms seated at the top. Like Japan, client relationships run deep and attributes such as loyalty play a far more important role within the business community then it may do so in other market contexts. The market is opening up to international firms in phases and already a number of firms have planted flags in its landscape. However, it will be a real challenge for global brands to find a place in such a developed market.
Adam Majeed - Asia-Pacific Editor
Joonki Yi and Gun Chul Do are Bae Kim & Lee’s leading lawyers for energy and infrastructure. The firm has had an active year in energy, mining, oil and gas, social infrastructure, utilities, telecommunications networks and transport. “Bae Kim & Lee has done a good job in my field - telecommunications regulation,” one client says. “Whenever we regulate the telecommunications market, the government presents various interpretations on regulations and rules. The firm has provided rational interpretations.”
The firm advised LG International in its $550 million acquisition of equity in STX Energy, a Korean thermal power generation company, from Buffalo E&P, an associate of Orix in Japan.
In social infrastructure, it advised Hanwha Engineering and Construction Corporation in its role to develop the $8 billion Bismayah New City, which is the first post-war residential development project in Iraq.
In telecoms, it helped KT Corporation persuade the government that its client should be assigned the 1.8 GHz band assigned by the Ministry of Science, ICT and Future Planning that for Long-Term Evolution (LTE) which enabled the client to dominate the mobile communications market in Korea.
Finally in transport, the firm acted for K-sure, an export credit agency of Korea, on the enforcement of a mortgage against seven vessels after an event of default under a loan agreement.
Key energy and infrastructure lawyers at Kim & Chang are Young Kyun Cho, Ick Ryol Huh and Chang-hee Shin. The firm is an undisputed leader in the stable legal market of independents and its energy practice is comprised of over 30 professionals, including attorneys, economists and industry experts. “It’s an established practice with credibility and expertise that can’t be made in a day,” one partner says. “The other law firms are trying to catch up with it.”
Kim & Chang advised POSCO Energy as part of the seller’s efforts to restructure its business through bankruptcy proceedings. The seller offered to sell 100% shares in the target company, which holds a license to build and operate a coal power plant. The firm acted for GS Holdings on its acquisition of 72% of the shares of STX Energy from Buffalo E&P. Subsidiaries STX Electric Power is developing Korea’s first coal-fired IPP, and STX Yeongyang Wind Power is developing one of the largest wind power plants in Korea.
In the wider region, the firm advised Korea East-West Power in its participation in the Kalsel-1 coal-fired power project in Indonesia. It gave advice on matters including investment structuring, establishment of the project company, shareholders agreement, financing agreements and project agreements. “It’s a very client oriented full service firm,” one client says. “And it has a very strong background in the energy field.”
Lee & Ko is another of the strong independent Korean law firms that sit atop the legal market. Its long experience has resulted in the strong relationships it has developed with domestic clients like KEPCO, KOGAS, POSCO, STX Energy, SK Energy and Korea Resources Corporation and international clients like BOC Gas, Nippon Gas, Osaka City Gas and BP. “Lee & Ko has a strong banking practice,” one practitioner says. “Energy is a sub-area of that banking practice, and it’s strong on the project finance aspects of power plant developments.”
The firm advised SK E&S on all facets of the Jangmoon LNG Combined Cycle Power Plant project, including project and financing documents. This is one of the largest power plant-related transactions in Korea and the project includes the development, construction and operation of a LNG combined cycle power plant in Jangmoon, Korea.
Lee & Ko was also appointed as the sole transaction counsel and advised Korea Southern Power Company (KOSPO) and Shinhan Bank in a deal concerning the production of synthesised natural gas from a site owned by KOSPO and the supply of natural gas to gas pipelines owned by the Korean government.
The firm also advised Shinhan BNP Paribas Asset Management in respect to a solar power plant project in Hamada pursuant to the New and Renewable Energy Act of Japan.
With Stephen Le Vesconte, Hyung Ahn, David Irvine, James McLaren and Stuart Salt as key contacts, Linklaters are strong among the international firms that are involved in work with Korean elements.
The firm has developed strong relationships with Korean corporates and financers including financial institutions, banks and ECAs. It often works closely with Korean sponsors and lenders on large project financings and other structured trade and export financings involving outbound investment from Korea in the energy, resources and infrastructure sectors.
For example it acted for lenders and ECAs including KEXIM and K-Sure on the $5 billion IPCI2 petrochemical project financing in Kazakhstan sponsored by LG Chem; it acted for the lenders and ECAs KEXIM and K-Sure on a $2 billion oil-backed financing for PDVSA relating to the development of the Puerto La Cruz refinery in Venezuela; and it advised Samsung C&T as sponsor of a $1 billion refinery project development and project financing in Gabon, Africa.
With partner Young Joon Kim heading the Korean practice, Milbank has advised on some of the project finance industry’s most important financing deals involving Korean institutions across the Middle East, South East Asia, the US and Latin America. “Milbank are strong in project finance,” one peer says. “It represents Korea Eximbank [KEXIM] in a lot of transactions.”
It regularly advises Korean governmental agencies, financial institutions and conglomerates that are becoming increasingly active in global financial and corporate work.
For example, the firm advised the Export-Import Bank of Korea and the US Export-Import Bank on the financing of four $10 billion nuclear power plant units in Abu Dhabi, UAE, being constructed by Korea Electric Power Corporation (KEPCO) and developed by a sponsor consortium led by Emirates Nuclear Energy Corporation (ENEC) and KEPCO.
It also advised Korea Eximbank as the lead lender on a tied $750 million financing of telecom network equipment supply contracts with Samsung Electronics relating to India’s first nationwide 4G telecom network being built by Reliance Industries; and acted for the Export-Import Bank of Korea, BNP Paribas and ING Bank on a 56MW run-of-the-river hydro project in Indonesia being developed by a sponsor consortium comprising Korea Midland Power, POSCO Engineering Company, BS Energy and Nusantara Hydro Alam.
Senior counsel Eugene Chang is the key contact for Orrick Herrington & Sutcliffe’s Korean energy and infrastructure offering. With lawyers qualified in the US, UK, Japan and Hong Kong, the firm’s Korea practice team is located in strategic locations such as Hong Kong, Tokyo, New York and Silicon Valley.
Orrick’s energy practice is particularly active in renewable energy and it acts for clients such as Eurus Energy, Green Power Investment, POSCO Energy, Korea Electric Power Company. It has worked on some of the first Korean wind and solar power projects in the US.
Highlights include acting for a consortium of banks including Korea EXIM Bank and Standard Chartered Bank Korea on a $190 million financing of a captive power plant development in Indonesia; and acting for LG Chemical on the $4 billion development of a polyethylene plant in Atyrau, Kazakhstan.
Michael Chang, Hyun Ju Helen Pak and Young-Ju Kim are the notable lawyers for the independent firm’s energy and infrastructure practice.
Shin & Kim’s practice’s real strength lies in the project finance aspects of projects and energy and it is a safe bet for outbound investment in infrastructure and energy work.
The firm has had a busy 12 months and advised Korea Trade Insurance Corporation (K-Sure) in debt financing negotiations and intercreditor issues involving Lake Charles Clean Energy’s project to finance construction and development of a petcoke-to chemicals gasification project in Lake Charles, Louisiana. The firm also advised the same client on all financing aspects related to the development, construction and management of gas-to-liquid facilities in the Kashkadarya Region of Uzbekistan, which aims to convert natural gas to marketable liquid products.
Closer to home the firm advised Macquarie Bank, Woori Bank, Samsung Life Insurance and other lenders in the KRW1 trillion ($880 million) project financing for the construction and operation of an LNG terminal to be located in Boryung, South Korea.
With Young Su Shin and Byong Wook Kim leading the way for Yulchon in energy and infrastructure, the firm has developed a good reputation in privatisations, mergers and acquisitions, development of green field projects in the energy industry, and transaction structuring.
Highlights include advising OCI on its KRW1 trillion ($880 million) construction of a combined heat and power plant; advising clients such as Korea Western Power and Hana Daetoo Securities on the build, operate and transfer (BOT) of a 500MW gas-fired combined cycle power plant in Myanmar; and advising Daewoo on a $220 million BOT project for hotel development, construction and operation in Myanmar.
Banking and finance
Bae Kim & Lee is known to act for the Korea Development Bank, Korea Finance Corporation and Kookmin Bank in onshore and offshore lending to borrowers. Deal highlights include its advice to OCI Company in the $120 million financing of Solar Energy Project for Mission Solar Energy – OCI Company’s US subsidiary; $7 billion project finance facilities for Ma’aden Wa’ad Al Shamal Phosphate Project; and $2.9 billion worth of project finance facilities in the Sohar Refinery Improvement Project and refinancing of ORPC facilities.
The capital markets team led by Keun Byung Lee has been active in the equity capital markets, especially in relation to IPOs and GDR offerings. It was involved in the Hyundai Rotem IPO and advised underwriters Goldman Sachs and Deutsche Bank in the $150 million issuance of global depositary receipts of Kolao Holdings, a holding company incorporated in the Cayman Islands and listed on the Korea Exchange.
In the research period the firm brought in Nam Woo Kim from LG Electronics to its competition and antitrust team, which also includes six counsel who previously worked at the Korea Fair Trade Commission (KFTC). The firm acted for leniency applicant Hyundai Oilbank in its appeal of the KFTC’s ruling in the Seoul High Court. The appellate court cancelled KFTC’s ruling in favour of the client.
Bae Kim & Lee’s M&A practice is particularly strong in private equity, financial services and energy and resources. The firm advised Hana Financial Group’s acquisition of HSBC’s stake in Hana HSBC Life Insurance; it advised KB Financial Group in its $277 million acquisition of Woori Financial from Woori Financial Holdings; and advised Affinity Equity Partners in its $267 billion equity investment in Loen Entertainment.
Restructuring and insolvency
In the past year Bae Kim & Lee continued to advise on some of the largest restructuring cases in Korea, including Tongyang’s rehabilitation – the largest company filing for rehabilitation in 2013; the largest shipping company filing for rehabilitation ever in Korea with Pan Ocean’s – formerly known as STX Pan Ocean – restructuring; and Woongjin Holdings bankruptcy.
Banking and finance
The firm strengthened its practice with the hire of Hee-Jung Shim, who was formerly at Kim & Chang and SC Chartered Bank Korea. The firm has been busy in project finance work in Southeast Asia and advised the Export- Import Bank of Korea in the $600 million financing by KEXIM, Mizuho Bank, HSBC, Citibank, Tokyo-Mitsubishi UFJ to a Vietnam oil and gas company to a build a coal-fired thermal power plant in the Thai Binh Province in Vietnam.
Young-Kyu Yoon has joined the practice from Minju Law and the highlight deal for Jipyong’s capital markets practice was when it acted for Kolao Holdings, a Cayman company listed on the Korea Exchange with primary business in Laos. It was the first time a Korea Exchange listed foreign company issued global depositary receipts (GDRs) in an overseas stock exchange – the Singapore Exchange. The firm also advised on the very first IPO on the Cambodia Stock Exchange and are currently advising on two more IPO matters in Cambodia that are pending closing.
The firm’s antitrust and competition practice is made up of former Korean Fair Trade Commission (KFTC) officers, including former standing commissioner of the KFTC. The firm advised Trade Division, Hanwha in an investigation by the KFTC on possible collusion by sellers of bearings sold in the domestic market.
In the research period, the firm’s M&A department was strengthened by the hire of Yung-Jung Jang from Sojong Partners, but was hit with the departure of Min Shin to Kim Chang & Lee. The firm advised Troika Resources Investment in the acquisition of a $118 million stake in an oil and gas production mine in Alberta, Canada.
Restructuring and insolvency
Jipyong’s bankruptcy and restructuring group is made up of attorneys with knowledge of local bankruptcy laws and an understanding of advanced bankruptcy systems in key territories like the US, UK and Japan. The firm advised IM Investment & Securities on STX Construction rehabilitation proceedings and acted for the client in related litigation.
Banking and finance
“It’s excellent,” one client says. “Kim & Chang provides US-style service in a Korean context.” The firm brought in former deputy president of KB Financial Group, Min Ho Lee, in February 2014 to shore up its banking and finance practice. It was also involved in South Korea’s first coal-fired independent power project financing when it advised on the structure of the financing, prepared financing documents and reviewed legal issues for arranger Korea Development Bank.
It’s been another strong year for the firm in capital markets under the leadership of Kye-Sung Chung. Jong-Hyun Park and Myoung-Jae Chung led the team that advised Morgan Stanley Private Equity in Hyundai Rotem’s $586 million IPO on the Korea Exchange. It was the market’s largest IPO since the 2010 listing of Samsung Life.
The firm’s antitrust group was involved in nine out of ten of the largest foreign-to-foreign merger cases in 2013 and had a part to play in Korea Fair Trade Commission’s first ever investigation concluded through the new consent order system – Naver’s alleged abuse of market dominant position. It also acted in some important cartel matters and successfully advised MetLife Insurance in a criminal case where the prosecutor’s office investigated certain life insurers in the alleged fixing of commission rates on variable life insurance products in Korea.
“It’s flexible in structuring a team, has a client friendly attitude, an abundant database, and provides services in a timely manner,” one client says. Besides strengthening its M&A team with the hire of Edward Kang and John Park, the firm advised Anheuser-Busch InBev, KKR and Affinity Equity Partners in the $6 billion acquisition and sale of the holding company of Oriental Brewery. The transaction was the largest cross-border and private equity M&A transaction in Korean history and threw up challenging legal and tax structuring issues.
Restructuring and insolvency
In restructuring and insolvency the firm hired Jang Hoon Kim – who was a judge in various courts handling bankruptcy for nine years – and advised clients in about strategies and effects related to rehabilitation proceedings by the Korean court in respect to construction projects where SsangYong E&C is the contractor.
Banking and finance
The firm’s finance group continued to advise the major Korean and foreign banks doing business in Korea and brought in Jai Hyung Lee in September 2013 from Shin & Kim. It advised the Export-Import Bank of Korea and the Korea Trade Insurance Corporation in a $1.5 billion loan for the Sabine Pass Liquefaction Project. It’s the first project where the US exports LNG (liquefied natural gas) and is a rare example where most of the commercial banks in Korea teamed up with the Korean export credit agencies in financing a large overseas project.
Enjoying a strong reputation for securitisations, Lee & Ko was also continuously active in the bond market during the research period. The firm advised Merrill Lynch, Pierce Fenner & Smith and other underwriters in the Republic of Korea’s €750 million 2.125% notes due 2024 and $1 billion 4.125% notes due 2044 – the first instance of an issuance of 30-year-maturity foreign exchange equalisation bonds by the state. The firm hired Heejin Yi from Goodwin Procter and Ha Young Rhee from Hughes Hubbard & Reed.
In the wider context Lee & Ko has been representing Samsung as lead global counsel in its patent war with Apple and was able to obtain a complete dismissal for abuse of dominance charges brought by Apple at the Korean Fair Trade Commission. Apart from the electronics sector the firm has acted for clients in sectors such as pharmaceuticals, construction and automotive.
The firm strengthened its wider M&A practice with the hires of Yun Tae Hong from Hyundai Heavy Industries, Joseph Hong from Yulchon and Taek Rim Oh from Shin & Kim. Deal highlights include advising Cheil Industries and Samsung Electronics in the $350 million acquisition of 50% of shares in Novaled and the $41 million acquisition of Midas by Ansell.
Restructuring and insolvency
Construction companies have many ongoing time-consuming projects in Korea and a rehabilitation plan usually becomes available only when the concerned parties settle. The firm acted for STX construction in the early resolution of its fast-tracked rehabilitation proceedings which started in April 2013 and was approved in October 2013.
Banking and finance
“Most of the major firms provide great service, but one thing about Shin & Kim is that they never give up even if the client gets sick and tired,” one client says. “We would not have closed the deal without them.”
The firm has a strong relationship with the Export-Import Bank of Korea (KEXIM), who are involved in most of the major project financings where Korean companies are contractors and sponsors. It advised the client in a $430 million credit facility for the construction and acquisition of 18 tankers by Scorpio Tankers. The facility provides flexibility to the sponsor to use a part of KEXIM’s commitment to issue bonds in the international market that will be guaranteed by the client.
The firm’s banking and finance practice is integrated and is not only strong in traditional lending but also in the capital markets. The firm acted in the $19 million IPO of Legochem Biosciences’s shares on the Korea Exchange. The transaction was one of the biggest Korean IPO deals involving a bio chemical company in 2013.
At the start of 2014 the firm hired Buhm-Jo Kim – the former vice president of the Korea Consumer Agency – as an advisor to its firm. It acted for a confidential defendant in a truck cartel investigation. The case also involved issues related to the extent of a surviving entity’s liability for cartel following certain types of M&A transactions.
Shin & Kim is one of the top firms in the market when it comes to M&A deal volume and deal count. The firm advised ORIX – a Japanese financial services company – in its $630 million acquisition and sale of STX Energy; it advised Korea Deposit Insurance Corporation and Woori Finance Holdings in the $2 billion sale of Kyongnam Bank and Kwangju Bank after Woori Holdings’ spin-off and restructuring; and in the sale of shares to Samsung Corning Precision Materials from Chairman Seok Hyun Hong.
Restructuring and insolvency
Shin & Kim has an insolvency team of around 40 lawyers that advises debtors and creditors on major insolvency cases. It was extensively involved in drafting the new insolvency legislation of Korea. In restructuring matters it has been involved in some of the headline rehabilitations such as Tongyang and Pan Ocean.
Banking and finance
Yoon & Yang’s banking & finance group has been active in the financial services sector in deals related to the privatisation of Woori Bank. It has been active in the sales of Woori Bank and Gyeungnam Bank and in the acquisition of Woori F&I. The firm also brought in Yoon Chang Kim from the National Intelligence Service to investigate unfair trade practices in financial sectors.
Seung Soon Choi heads the firm in capital markets and the firm has a strong relationship with the Industrial Bank of Korea (IBK) and the Export-Import Bank of Korea (KEXIM) in connection with offerings of Euro MTN under the US Shelf Registration and issuance of Samurai bonds.
Jae Young Kim heads the firm’s antitrust department and Chang Ho Kum is a recent arrival from Yulchon. The firm advised Intel Corporation, Intel Semiconductor and Intel Korea in a lawsuit filed by Intel against the Korea Fair Trade Commission (KFTC) in order to annul penalties imposed by the KFTC on Intel for the alleged abuse of dominance.
Yoon & Yang has strengthened its M&A team in the past year with the hires of Do Hyung Kim and Sung-Jin Kim from Yulchon. As South Korea looks to reshape the securities industry in order to compete globally, the firm has been involved in M&A transactions between financial institutions. It also acted for Qualcomm in acquiring newly issued shares of Pantech; Mitsui Chemicals in acquiring KOC Solution as well as a German dental company group; and STX Energy in the sale of its old shares and newly issued shares to ORIX Corporation.
Restructuring and insolvency
“Yoon & Yang demonstrated strong expertise both in the bankruptcy issues and the issues related to M&A of companies under rehabilitation,” one client says.
The firm acted for Ernst & Young Han Young in the sale of shares in BnB Sungwon, a company under reorganisation; it also advised Dong-Il Industrial in respect to its acquisition of new shares in GD Ecotech – a company under reorganisation – in the public sale approved by the Bankruptcy Court.
Banking and finance
In the research period Yulchon strengthened its banking and finance team with the hires of Ben Hur from Kim & Chang and David Yang from Shin & Kim. The firm enjoys a strong reputation in the international banking sector and has been recently active in ship finance. It acted as lead counsel for Sinokor Merchant Marine in a $40 million ship financing – made up of senior and junior tranches – for a VLCC, and also acted as Korean counsel for Hyundai Glovis on a $196 million ship financing for four car carriers being built at Hyundai Samho Heavy Industries.
The firm has been active in the equity and debt capital markets. It advised Hyundai Rotem as issuer counsel on its $58 million IPO of common shares on the Korea Exchange; it advised Midong E&T as issuer counsel on its $19 million IPO of shares on the Korea Exchange; and it advised NH Bank on the issuance of $300 million in Eurobonds.
Yulchon is strong in competition. Its antitrust practice group is a stand-alone practice that also contains former judges and Korea Fair Trade Commission (KFTC) officials. Apart from being involved in a number of confidential cartel cases, the firm acted for Universal Music in a case where the KFTC found that the client colluded with 12 other content providers and imposed sanctions. On appeal, Yulchon managed to get the sanctions lifted.
Apart from handling M&A work such as mergers, corporate divisions and acquisitions of stock, the firm’s M&A team offers professional counsel in more specialised M&A areas, including advice on companies under rehabilitation proceedings and guidance in hostile M&A takeover attempts. The firm advised Samsung Everland in the $456 million sale of its engineering and asset management business to S-1.
Restructuring and insolvency
“Yulchon succeeded in obtaining recognition orders in 11 countries in a short period of time,” one client says. “Thus we could achieve our aim to obtain orders in more than ten countries. As orders were obtained very quickly, we could avoid our assets, in particular, our vessels in foreign countries, being seized by creditors.”
The firm’s restructuring and insolvency practice has been busy in some of the markets leading cases. For example, the firm helped Pan Ocean file for rehabilitation and being one of Korea’s biggest shipping companies, the rehabilitation process was huge.