[IB Tomato] “Download 0 won”… Daesangga's second daughter, controversy over VC credit sale

Unusual deal with no down payment… UTC Invest ‘Customer Acquisition’
Cash is insufficient compared to the acquisition price of tens of billions of won, and the installment structure is questionable.
Investigation into the fado incident and representative lawsuit... Overlapping legal uncertainty

Forest Partners, a domestic private equity fund (PEF) management company, is raising suspicion in the industry over its deal to acquire UTC Investment (hereinafter referred to as UTC Investment). This is because a candidate for the next head of a large company sold his personally owned venture capital (VC) company on credit without even receiving a down payment. Handing over a company without receiving a single penny is a rare case in the industry. In addition, in the case of Forest Partners, the acquiring company, the controversy is spreading as the legal risks related to the 2023 wave incident have not yet been resolved and the company's representative is involved in a lawsuit.

Im Sang-min, Daesang Group's second daughter, sale structure without down payment

According to the investment banking (IB) industry on the 1st, on the 1st of last month, Forest Partners received the entire UTC Invest stock transfer (1 million shares) from Vice President Im Sang-min (001680). Forest Partners plans to pay the acquisition price in three installments over the next three years. The company did not disclose the size and schedule of the acquisition. Considering that UTC Invest's net assets as of the end of March were 30.8 billion won, the industry estimates that the acquisition price of UTC Invest is in the range of 35 to 40 billion won when the typical domestic venture capital management premium (15 to 30%) is reflected.

According to the Financial Supervisory Service's electronic disclosure system, Forest Partners' current assets on a consolidated basis at the end of last year were approximately 4.5 billion won. Cash equivalents amount to 800 million won, which is only 1/50th of the estimated transaction amount. Considering this, there is an analysis that Forest Partners will take over the management rights of UTC Investment through a fund or a separately established special purpose corporation (SPC).

What the industry is paying attention to is not only the financial power of the acquirer, but also the unusualness of the transaction method. In general, in VC mergers and acquisitions (M&A), stocks are transferred with down payment and balance paid sequentially after the transaction is calculated. However, in this case, there is an installment payment structure without even a down payment, so it is evaluated that “assets worth tens of billions of won were effectively handed over on credit.”

An official in the venture investment industry told , "It appears that it will be difficult for Forest Partners to pay for the acquisition of UTC Invest with its own funds," and added, "It appears that a paid-in capital increase will be inevitable in the future, so there is a need to take a good look at the payment entity."

Ji Min-hee, a lawyer at Daeryun Law Firm, told , "If this transaction is for the interests of a specific person or profit realization, it could lead to problems such as illegal trading under the Capital Markets Act, breach of trust in business, and violation of the Aggravated Punishment Act for Specific Economic Crimes. The key is whether the financing method during the acquisition process was justified and how the company's assets are operated for whom after the acquisition."

Regarding the payment, Forest Partners said, "We plan to liquidate major funds between 2025 and 2027 to recover investment funds and receive performance fees, and secure additional funds through the recovery of two convertible bonds that are maturing, sale of non-business assets, and convertible bonds assigned to shareholders."

From legal risks to rumors of external intervention... growing suspicion

Another issue surrounding this transaction is the acquirer’s legal risk. When a policy agency selects a GP (consignment management company) for an investment project, management stability is an important evaluation indicator, but Forest Partners is finding it difficult to fully meet this requirement.

Forest Partners intensively sold 41.9 billion won worth of Fado shares in the week before the stock price decline due to Fado's 'earnings shock' in November 2023. Accordingly, the Financial Supervisory Service's Capital Market Special Judicial Police and the Southern District Prosecutors' Office detected the circumstances of illegal transactions by internal executives and employees at Fado and began an investigation. The investigation is still ongoing.

Here, owner risk also emerged. Forest Partners CEO Han Seung, who took office as UTC Invest's representative in August, is embroiled in a lawsuit related to forced harassment of employees.

Han Seung, CEO of Forest Partners, told , "There are no plans at all to raise funds from the target to pay for the acquisition. It is true that UTC Investment was not aware of the possibility of returning GP from the policy institution investment project due to a change in major shareholders during the acquisition process." He then claimed, “The lawsuit against me, including forced harassment, was brought about by an employee who left the company two years ago out of spite,” and added, “There is a high possibility that he will be found not guilty.”

Some speculate that the background to this transaction is Vice President Lim's spouse, Kook Yoo-jin, head of Blackstone Korea. In the industry, suspicions are raised that “CEO Kook is actually trying to expand his control through Forest Partners, with which he is close.” In fact, it is known that CEO Kook had been interfering with the management of UTC Investment even before the sale, and had been in dispute with internal executives.

In particular, experts are pointing out that this transaction has the potential to be used as an expedient gift structure beyond a simple sale. After transferring shares on credit without a down payment, actual control may remain with the owner's family depending on who invests funds during the future paid-in capital increase. Tax experts explained, "If shares are transferred between specially related persons at a price lower than the market price or in an abnormal manner, the National Tax Service may determine that the stock is subject to gift tax," adding, "We cannot rule out the possibility that this case will also be subject to investigation."

A Forest Partners official told , "It is true that the relationship between CEO Yoo-jin Kook and Forest Partners is close," and that "the close relationship with CEO Kook had an influence on Forest Partners' acquisition of UTC Invest at a relatively low price."

Meanwhile, CEO Kook owns ‘Astra Holdings’, a private real estate corporation that has no major contact with his main business, PE. The business purposes of Astra Holdings include ▲real estate development, implementation, and consulting ▲real estate leasing and subleasing ▲management consulting and consulting ▲financial investment and investment advisory.

Reporter Sang-rok Yoon (ysr@etomato.com)

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[IB Tomato]"Down payment of 0 won"... Daesangga's second daughter, controversy over sale of VC credit (link)