Private Equity 2026 Comparisons

Between the onset of the high interest rate era in 2022 and early 2025, private equity funds, whose returns must exceed the cost of leverage, faced increasing hurdles in both fundraising and investment. As capital flows from major financial institutions and institutional investors slowed, small to mid-sized general partners (GPs) significantly reduced their investments through project funds. In contrast, larger GPs focused more on deploying dry powder from their blind funds. Since the second half of 2024, however, interest rate cuts and improved market conditions appear to have restored deal momentum. According to market data, approximately 690 M&A transactions worth about KRW89 trillion were recorded in 2025, representing the highest annual volume since 2021, and the number of transactions exceeding KRW1 trillion rose to 18 from eight in 2024. Private equity funds – and global sponsors in particular – were active on both the buy side and the sell side throughout the second half of 2025 and the first half of 2026.

With it becoming increasingly burdensome for a single GP or fund to shoulder the entire funding requirement, joint investments involving multiple funds, often of varying types, have become more common. This trend has been further accelerated by the October 2021 amendment to the Financial Investment Services and Capital Markets Act (FISCMA), which unified the rules governing the investment activities of private funds, which are now classified as “general private funds” or “institutional private funds” according to their investor base. It is now common to see not only blind funds and project funds forming consortia, but also general and institutional private funds co-investing in the same transaction.

Meanwhile, since institutional private funds became permitted to engage in lending, quasi-debt investments and minority equity stakes, investment structures have increasingly favoured downside protection over maximising upside. Structures involving redeemable convertible preferred shares (RCPS), put options for controlling shareholders, convertible bonds and subordinated (first-loss) tranches taken by anchor limited partners (LPs) are now more frequently used to safeguard capital in uncertain markets.

Although investment sentiment in Korea was dampened in early 2025 by factors ranging from the US-led tariff conflicts to domestic political uncertainty, the M&A market rebounded strongly in the second half of 2025 (see 1.1 Private Equity Transactions and M&A Deals in General), with large corporates divesting non-core businesses and private equity funds on the other side of many of the largest transactions. Notably, the sale of a controlling stake in SK Specialty by SK (the largest buyout of 2025 at approximately KRW2.7 trillion) and the divestment of Lotte Rental by Lotte both proceeded with large private equity firms as buyers: Hahn & Company and Affinity Equity Partners, respectively. Other notable private equity acquisitions included:

• KKR’s acquisition of the environmental subsidiaries of SK Ecoplant (approximately KRW1.7 trillion);
• Glenwood Private Equity’s acquisition of LG Chem’s water treatment business (approximately KRW1.4 trillion); and
• in June 2026, the Carlyle Group’s agreement to acquire a controlling stake in Chungho Nais, a water purifier rental company.

In terms of sectors, environmental and infrastructure assets and carve-outs of non-core businesses from large conglomerates were among the most active areas of private equity investment. Exits to strategic buyers were also prominent:

• Macquarie Asset Management sold DIG Airgas to Air Liquide for approximately KRW4.85 trillion, in the largest transaction of 2025; and
• in March 2026, Hahn & Company agreed to sell Korean Air C&D Service, the in-flight catering and duty-free business it had acquired in 2020, back to Korean Air at an enterprise value of approximately KRW1.7 trillion.

Global sponsors have been notably active: by some estimates, overseas funds accounted for roughly 80% by value of private equity buyouts above KRW500 billion in the first seven months of 2026, in part because domestic GPs have faced heightened public and regulatory scrutiny (see 2.1 Impact of Legal Developments on Funds and Transactions).

Macro-economic and geopolitical factors currently appear to affect the execution of deals more than the appetite for them. Dry powder held by Korean private equity funds is reported to be at record levels, but price gaps between sellers and buyers, exchange rate volatility and uncertainty over the legislative changes discussed in 2.1 Impact of Legal Developments on Funds and Transactions have caused several large auctions to stall in 2026 after the selection of a preferred bidder. Overall, the market appears to remain active, although completion of the largest transactions has become more selective.

Since the amended FISCMA took effect on 21 October 2021, private funds have been categorised as “general private funds” or “institutional private funds”, and both types of private funds are allowed to invest freely. However, the scope of investors for institutional private funds is limited to qualifying institutional investors, including financial companies and listed companies meeting certain requirements, and the offering procedure for general private funds, which are open to individual and general investors, has become more rigorous.

Recent Legislative Developments

More recently, the legislative focus has shifted to corporate governance and the protection of general shareholders of listed companies, which affects private equity funds primarily as acquirers of, and investors in, listed companies. The Commercial Code was amended three times between July 2025 and March 2026:

• the first amendment, effective 22 July 2025, extended directors’ fiduciary duties to all shareholders (see 3.1 Primary Regulators and Regulatory Issues);
• the second, effective 10 September 2025, makes cumulative voting mandatory and requires at least two audit committee members to be elected separately (subject to the 3% voting cap) for listed companies with total assets of KRW2 trillion or more; and
• the third, effective 6 March 2026, requires treasury shares to be cancelled within one year of acquisition unless their retention is approved by shareholders for a statutory purpose.

For sponsors, these changes make it easier for minority shareholders and activist funds to obtain board representation and restrict the use of treasury shares as a takeover defence or as deal currency (see 7. Takeovers).

The FISCMA is also being amended again. An amendment passed by the National Assembly on 20 August 2026 will take effect three months after promulgation, with the following effects:

• it requires the merger consideration in mergers involving listed companies to be a fair value, taking into account market price, asset value and earnings value;
• it requires the board to publish an opinion on the purpose and fairness of the merger; and
• for mergers between affiliates, it requires the external valuer to be appointed by the audit committee.

Bills to introduce a mandatory tender offer regime (see 7.3 Mandatory Offer Thresholds) and, following the reform plan announced by the Financial Services Commission in December 2025, to strengthen the supervision of institutional private funds and their GPs (covering GP accountability, reporting to regulators and LPs, internal controls and the monitoring of leverage) remain pending before the National Assembly.

Finally, in March 2026 the government announced that the listing of subsidiaries of listed companies (so-called duplicate listings) would be prohibited in principle and permitted only by exception, and the KRX published implementing guidelines in August 2026 (see 10.1 Types of Exit).

Primary Regulators

The primary regulators relevant to private equity funds and transactions involving these funds are the Financial Services Commission and the Financial Supervisory Service, as funds established under the FISCMA bear a duty to continuously report matters ex post to the Financial Services Commission and/or the Financial Supervisory Service from the time of incorporation/establishment to the time of liquidation, in accordance with the applicable laws. The subject of these reports consists not only of the fund’s total commitment and contribution amounts, but also the identities of the target companies in which the funds made investments.

On the antitrust regulatory front, the formation of a private equity fund under the FISCMA was historically subject to a business combination report to the Korea Fair Trade Commission (KFTC), as such funds take the legal form of a company. Since the amendment of the Monopoly Regulation and Fair Trade Act that came into effect on 7 August 2024, the formation of a private equity fund is no longer subject to a business combination report, but this exemption applies only to the establishment of the fund itself; a business combination report is still required in the following cases:

• when a private equity fund invests in a target company; or
• when a new limited partner invests in an already established private equity fund or an existing limited partner makes an additional investment or acquires the interest of another limited partner, although a simplified review process applies in such cases.

When private equity funds established overseas seek to offer equity to Korean investors, they must undergo a registration process with the Financial Services Commission and the Financial Supervisory Service in advance.

In terms of anti-bribery, sanctions or ESG issues, there is a growing trend among overseas funds to conduct separate due diligence on the target’s compliance issues before consummating the transaction. To the extent any shortcoming is found in the course of the diligence, the common approach is to introduce new policies or demand enhancement of the existing policies of the target.

Regulatory Issues

There are three main regulatory issues that impact transactions involving private equity funds.

• First, if the target is a listed company, private equity funds, like other market participants, have disclosure obligations on various matters to the Financial Services Commission, the Financial Supervisory Service and/or the Korea Exchange (KRX). In addition, although this was historically rare in Korea (see 7. Takeovers), if a private equity fund intends to invest by way of a tender offer, it must proceed in compliance with the procedures prescribed by the FISCMA; one such requirement is to provide evidence of funds sufficient to satisfy accepted offers prior to the commencement of the tender offer. This, in practice, is burdensome for private equity funds due to the nature of the timeline of their capital calls (ie, within a certain period leading up to closing). In the 2023 Osstem Implant transaction, a landmark tender offer deal in South Korea, evidence of funds was provided to regulators in the form of letters of commitment (which led to the regulators later revising the relevant regulations to expressly allow this form of evidence). In this way, investments by way of tender offer have become a viable option for private equity funds.
• Second, when acquiring more than a certain equity stake in a target that is above a certain size, a private equity fund must file a business combination report with the KFTC and obtain clearance. While this regulation also applies to other market participants, in the case of private equity funds, the anti-competitiveness is determined based on the entirety of the fund’s portfolio companies.
• The last regulatory issue applies only to overseas funds, which are obliged to report on the acquisition of target shares to the Korea Trade-Investment Promotion Agency, foreign exchange banks and/or the Bank of Korea under the Foreign Exchange Transaction Act or the Foreign Investment Promotion Act. Furthermore, these overseas funds may be restricted from investing, or limited in their shareholding ratio, in certain industries in which foreign investments are statutorily barred or regulated, such as broadcasting or telecommunications.

In addition, if the target possesses National Core Technology as designated under the Act on Prevention of Divulgence and Protection of Industrial Technology, the overseas fund must obtain prior approval from, or file a report in advance with, the Minister of Trade, Industry and Resources in order to acquire over a certain percentage of the target’s shares. Foreign investments may also be subject to a national security review under the Foreign Investment Promotion Act, as was Air Liquide’s acquisition of DIG Airgas from Macquarie Asset Management, which closed in January 2026 after such a review.

Korean merger control and foreign investment rules do not treat financial investors differently according to whether they are sovereign wealth funds, or are backed by such funds, although the identity of significant co-investors may be considered in a National Core Technology approval or national security review. The EU FSR regime is not directly relevant to transactions in Korea and becomes relevant only where the target has EU operations meeting the EU thresholds; to date it has not featured meaningfully in Korean private equity transactions.

Recent Developments or Evolution

On 22 July 2025, an amendment to the Korean Commercial Code concerning directors’ fiduciary duties came into effect. Directors are now subject to a fiduciary duty not only towards the company but also towards all shareholders, not just controlling or select shareholders.

Under the previous law, directors were only required to faithfully perform their duties in the interest of the company. The Supreme Court of Korea had also held that granting preferential rights or status to certain shareholders could be permissible if it followed due process or was justifiable under specific circumstances. However, the amended Commercial Code now explicitly provides that: “In performing their duties, directors must protect the interests of all shareholders and treat the interests of all shareholders fairly.”

This amendment is consistent with Korea’s broader legislative trend of strengthening minority shareholder protection under the Commercial Code and the FISCMA. The following issues have been raised persistently in the Korean market:

• the use of unfair merger ratios leading to dilution of minority shareholders’ interests;
• stock price declines following physical spin-offs and relisting of subsidiaries; and
• capital increases or treasury share disposals favouring controlling shareholders.

In response, recent legislative and regulatory reforms include:

• enhanced disclosure and external valuation requirements for mergers;
• mandatory appraisal rights for dissenting shareholders in physical spin-offs; and
• stricter regulations on the use of treasury shares.

The latest amendment to the Commercial Code, taking a step further from such institutional improvements, codifies the duty of directors to act fairly towards all shareholders as a fundamental principle. As a result, in transactions that may give rise to conflicts of interest among shareholders (such as corporate restructurings), directors will need to conduct more rigorous reviews and establish internal control standards to fulfil their fiduciary duties. Some critics, however, argue that this heightened obligation may unduly constrain directors’ managerial discretion and discourage proactive business decision-making.

In its first year, the amended duty has begun to shape transaction practice. For transactions involving potential conflicts between controlling and general shareholders (such as mergers, comprehensive share swaps and tender offers aimed at delisting), Ministry of Justice guidelines on directors’ duties to shareholders recommend a special committee of independent directors, independent outside experts and adequate information to shareholders, and the Financial Supervisory Service has actively required the supplementation of disclosure filings lacking these fairness measures.

In the course of M&A in Korea, it is standard practice to conduct full-blown due diligence, unless the target is very small. Information is usually provided through a virtual data room and management presentations/break-out sessions, as well as periodic requests for information (RFIs) and written Q&As, among other platforms. While the depth of review differs on a case-by-case basis, the legal due diligence is generally conducted without a materiality threshold.

For private equity investors, the focus of legal due diligence does not stray significantly from that of a corporate buyer, and due diligence is conducted in all areas, including corporate/securities, equity ownership/dilution, material contracts, licences/permits, employment/labour and litigation, etc. However, in the case of private equity investors, it is more common to perform separate due diligence on compliance matters (anti-bribery and corruption/AML/sanctions) or ESG issues.

Although vendor due diligence is generally not a common feature, in comparison to transactions involving a typical corporate seller, transactions involving private equity sellers are more likely to feature vendor due diligence or fact-books, particularly in the context of an auction sale. While there may be instances where advisers attach a liability cap to the vendor due diligence reports upon providing credence thereto, the status quo is non-reliance. This also applies to buy-side diligence reports.

Most acquisitions by private equity funds are carried out through private treaty sale and purchase agreements. Although auction sales are often held for larger-scale M&A, privately negotiated transactions are more common across the board.

Tender offers, on the other hand, were historically rare in Korea. However, there have been several high-profile tender offers involving private equity buyers since 2023, such as MBK Partners and UCK Partners’ tender offer for Osstem Implant, IMM PE’s tender offer for Hanssem, and Hahn & Company’s tender offer for Lutronic. The trend accelerated in 2024, when tender offers aimed at delisting were announced for ten listed companies, a majority of them led by domestic or overseas private equity funds, including Hahn & Company’s tender offer for Ssangyong C&E, Affinity Equity Partners’ tender offer for Lock&Lock, and MBK Partners’ tender offer for Connectwave. Private equity-backed tender offers have continued in 2025 and 2026 (see 7. Takeovers).

There are no notable differences between the terms of a privately negotiated transaction and the terms of an auction sale. However, it is often the case in auction sales that seller-friendly terms – eg, material adverse effect bring-down, warranty and indemnity (W&I) insurance – are agreed upon from a closing certainty or seller’s clean exit perspective.

In Korea, although private equity funds sometimes become party to the transaction, it is more common for a special-purpose company incorporated by the fund for such purpose (investment purpose company, or IPC) to become involved in the acquisition documentation. In order to limit liability exposure, funds are expected to maintain the current deal practice of utilising IPCs for acquisition documentation purposes. Inbound investments by overseas funds are also structured in the same way, by utilising IPCs.

Financing of Private Equity Deals

For private equity funds under the FISCMA, deals are normally financed by contributions from the investors of the fund. For funds that apply a leverage strategy, the IPC may also secure financing, but the leverage ratio thereof is restricted to 400% of net assets under the current FISCMA. As there is judicial precedent holding that providing assets of the target as security for the acquisition financing of the IPC may be deemed to be a breach of fiduciary duty of the target’s directors, acquisition financing is not secured by the target’s assets under Korean law; instead, acquisition financing is secured by the assets of the borrower (the IPC), such as the target shares that the IPC is to acquire through the deal.

Equity Commitment Letters

Private equity funds that are blind funds in possession of considerable assets under management or dry powder are not often required to furnish equity or debt commitment letters. Apart from such instances – particularly if project funds or other debt financing sources are employed – equity or debt commitment letters are more likely to be requested from such buyers. Furthermore, in the Korean M&A market, a contract deposit representing 5% to 10% of the purchase price is commonly requested by the sell side, in which case private equity buyers often satisfy this requirement by furnishing equity or debt commitment letters.

For overseas funds, equity commitment letters and debt commitment letters are provided in most instances.

Over the past 12 months, the availability of acquisition financing does not appear to have been a material constraint on private equity deal activity in Korea. Following interest rate cuts, the volume of acquisition financing arranged in 2025 reportedly recovered strongly; although arrangement volumes declined in the first half of 2026 owing to a scarcity of very large new deals, banks and securities firms have continued to compete for sponsor-backed financings. The manner in which comfort on the debt-funded portion of the purchase price is given at signing has not changed materially.

In buyout investments, it is uncommon for a consortium of private equity sponsors to collectively enter into a transaction, while in minority investments it is more common for a consortium of private equity funds to make a joint investment.

In Korea, direct and/or indirect co-investment by strategic/corporate investors that seek to acquire control over the target in the future and to make financial gain, alongside private equity funds, is commonplace. Under the FISCMA, investment by such strategic investors in the IPC is also permitted.

The articles of incorporation of private equity funds under the FISCMA often include provisions on granting priority rights to the limited partners to make joint investments with the fund, when it is difficult for these funds to unilaterally make investments given the size of the investment opportunity, and large institutional investors (eg, the National Pension Service) actively take advantage of these joint investment opportunities.

Fixed prices with or without a locked-box structure and completion accounts are all used as mechanisms for consideration in M&A transactions, but the predominant form is fixed price without a locked-box mechanism. In cross-border deals, completion accounts are also in wide use, but the domestic M&A market is also seeing more deals with completion accounts.

Rollover structures are common in transactions involving individual founders of the target who hold considerable equity stakes (eg, the largest shareholder), where their shares in the target, along with management and control rights, are transferred to private equity funds. Following this, the founders acquire a minority stake in the fund’s capital (eg, 20% to 30% of sale proceeds).

There are deals involving earn-outs, but they are not a common feature of private equity transactions. For example, an earn-out is rarely used where a private equity fund is the seller, since such funds (especially funds incorporated for the purpose of investing in a single target investment company) are focused on completing distribution and liquidation shortly thereafter. Apart from this, there are no notable differences between private equity funds and corporate investors or sellers in determining the consideration mechanism and level of protection in relation thereto.

As mentioned in 6.1 Types of Consideration Mechanism, locked-box consideration structures are not commonly used in private equity transactions but, when used, there have been instances of interest both charged on leakage and not charged on leakage. Reverse interest on leakage is not common.

Dispute resolution mechanisms featuring a dedicated expert are commonly found in locked-box or completion accounts consideration structures, and the parties to private equity transactions are typically obliged to adhere to the decision of these dedicated experts. It is common for a designated independent accounting firm to act as the dedicated expert on disputes for locked-box and completion accounts consideration structures. Consideration structures that take into account the outcome of certain contingent events or investigations (eg, environmental studies of real property) may involve a dedicated expert in the relevant field (eg, environmental consultants).

The typical level of conditionality in private equity transactions is mainly as follows and does not differ from general M&A transactions:

• representations and warranties of the parties shall be true and correct (in all material respects), and it is not uncommon for transactions involving private equity sellers to stipulate a material adverse effect to bring down the standard for business representations and warranties;
• parties shall have performed (in all material respects) the covenants required to be performed prior to closing;
• mandatory and suspensory regulatory conditions are met, particularly business combination clearance by the KFTC;
• there is no litigation prohibiting the consummation of the transaction; and
• in the case of a standalone “no material adverse effect” provision, the condition becomes a key point of negotiation.

Limiting conditions to regulatory conditions is not typical, and financing conditions are rarely found in acquisition documentation. Third-party consent conditions are included on a case-by-case basis, but infrequently; in the case of a change of control provision in contracts with key customers, the deal may be conditional upon procuring the relevant consents. Termination of these contracts may otherwise be deemed to be a material adverse effect. Shareholder approval is included as a condition (only) when legally mandated (eg, transfer of all or a material part of a business).

It is not common for a private equity-backed buyer to accept a “hell or high water” undertaking in deals with a regulatory condition. However, they are sometimes accepted in the bidding process by a fund investor that has no specific competing business in its portfolio, in order to gain an advantage over the other bidders. There is often a distinction between merger control and foreign investment conditions, where the “hell or high water” undertaking typically relates to matters of merger control, unless the underlying target’s assets include National Core Technology resulting in greater foreign investment scrutiny.

The EU FSR regime does not typically feature in the negotiation of these undertakings in Korean transactions, except in the rare cases where the target has significant EU operations.

In private equity deals, break fees or reverse break fees are not ordinarily used. If break fees are prescribed in the acquisition documentation, however, reverse break fees are generally also prescribed therein.

When prescribing break fees, the Korean Civil Code presumes the fees to be liquidated damages, and the fees can be reduced if the court finds that the amount is excessive in comparison to the actual damages. Therefore, most documentation deems the break fee to be a monetary penalty because the monetary penalty must be “in contravention of public order and standards of public decency” to qualify for the reduction, although the Korean Supreme Court has held that the courts can partially invalidate the amount, even in the case of a monetary penalty.

The triggers and amounts of break fees are a matter of negotiation and vary greatly from one deal to another, although amounts in the range of 5% to 10% of the purchase price (often corresponding to the contract deposit) are relatively common. A common trigger in deals involving private equity funds is when a party fails to consummate closing despite all closing conditions having been satisfied.

Apart from termination by mutual agreement, the typical circumstances of termination in private equity transactions are mainly as follows and do not differ from those of general M&A:

• if either party has (materially) breached the representations and warranties or has not performed (in material respects) the covenants prior to closing and has failed to cure this within a certain period; or
• if the closing has not occurred on, or prior to, the long-stop date, which is typically three to six months following signing (or nine to 12 months in a deal with antitrust concerns).

In transactions where a private equity fund is the seller, and, in particular, where the fund was established solely to invest in the target company, the seller’s interest lies in prompt distribution and liquidation; as such, it typically rejects any additional allocation of risk post-closing (ie, clean exit). Previously, funds achieved this purpose by bearing liability and providing an escrow for breach of representations and warranties on a short-term basis. More recently, it has become common practice for private equity sellers to limit their liability by demanding the buyer subscribe to W&I insurance and only bearing liability in the case of fraud.

In transactions where a private equity fund is the buyer, there are no notable differences with transactions involving general corporate buyers.

As explained in 6.8 Allocation of Risk, private equity sellers normally provide general warranties in the same manner as corporate sellers but attempt to limit liability by requiring the buyer to subscribe to W&I insurance.

For the same reasons as provided in 8.1 Equity Incentivisation and Ownership, it is not customary for the management team to hold shares, but where a management team is selling shares it holds, it normally provides the same level of warranties to the buyer as the private equity seller.

To limit liability for warranties, survival periods, de minimis, basket and cap are all utilised in documentation, and anti-sandbagging is generally a fiercely negotiated point. Survival periods for mid to large-size deals that proceed via auction bids are typically 18 months to two years, with longer periods usually granted for specific warranties on tax, labour, environment and compliance. Regarding quantum limitations, the amounts can vary from deal to deal, but caps rarely go beyond 10%.

Finally, on limitation on liability for known issues, while full disclosure of the data room as an exception to the warranties was not commonly accepted in the past, recently there has been an uptick in sellers that make such demands in conjunction with anti-sandbagging.

As examined in 6.8 Allocation of Risk, private equity sellers previously sought protections by bearing liability for breach of representations and warranties on a short-term basis and having an escrow in place to back these obligations. However, recently, private equity sellers have more often taken protection by making the buyer subscribe to W&I insurance and only bearing liability in the case of fraud. W&I insurance has become commonplace in deals with private equity sellers over the past several years.

However, where the seller is an overseas fund, the buyer must withhold capital gains tax, but because the calculation of the withholding amount is based on the information provided by the seller, if tax is later collected from the buyer, the seller must indemnify the buyer therefor. Although insurance companies now offer products that cover liabilities stemming from capital gains tax, the risk is most commonly covered by a guarantee or an escrow for credit reinforcement provided by the overseas fund or its parent.

When subscribing to W&I insurance, the coverage often extends to both fundamental and general business warranties, including tax warranties (for unknown risks), although the claims period for fundamental warranties would typically be for a longer duration. From time to time, the buyer may be inclined to acquire a standalone tax cover to insure any potential liability (which is a known risk) resulting from the seller’s capital gains tax obligations (as discussed above), particularly if the seller is a foreign entity.

In the case of escrow or holdback amounts, there is typically no distinction between recourse for fundamental and general business warranties.

Litigation in connection with private equity transactions is not common, but occurs from time to time. The most commonly litigated provisions are those on indemnification pursuant to breaches of representations and warranties, but disputes also occur in connection with shareholders’ agreements where a private equity fund is the minority investor (eg, disputes over put options following failure to conduct an IPO).

Up until the first half of 2023, public-to-privates in private equity transactions were uncommon. In the case of the Osstem Implant take-private transaction, the buy-side consortium comprising MBK Partners and UCK Partners had undergone two tranches of tender offers in order to meet the minimum shareholding threshold for delisting. Market observers believe that a key component for success in this landmark transaction was that the tender offer price was equal across the board, and all participants benefited from the control premium.

Since then, public-to-privates have become considerably more common (see 5.1 Structure of the Acquisition). Not all have succeeded: in several cases minority shareholders have declined to tender where they regarded the offer price as too low relative to the target’s asset value, leaving the bidder short of the shareholding required for voluntary delisting. Regulatory attention has increased accordingly, and in early 2025 the Financial Supervisory Service indicated that it would scrutinise delisting-purpose tender offers priced below net asset value per share, and target boards that remain silent on the offer and large dividends paid shortly after delisting.

Historically, the involvement of the target and its board of directors in a public-to-private transaction was limited until the tender offer was completed. Following the 2025 amendment to the Commercial Code extending directors’ fiduciary duties to all shareholders and the Ministry of Justice guidelines discussed in 3.1 Primary Regulators and Regulatory Issues, target boards are now expected to form a special committee of independent directors and to express an opinion on the tender offer. In 2026, most boards of tender offer targets have published such an opinion, in most cases after review by a special committee. In addition, the company plays a key role in holding meetings with shareholders and the board of directors during the delisting phase of the transaction. Relationship agreements between the buyer and the target are uncommon in Korea.

The FISCMA stipulates that holders of 5% or more of the shares in listed companies must disclose various matters, including the quantity and class of shares, security provision status, unit prices at the time of acquisition and disposition, and counterparties in the acquisition and disposition transactions. The 5% is calculated by aggregating the shares held by a shareholder and its specially related parties (including affiliates and joint holders). Shareholders of an unlisted company do not bear these obligations.

Shareholders of listed companies holding 10% or more on an individual basis must disclose their shareholding status. Holders of 5% or more shares must report on any change of 1% or greater to their shareholding ratio. Holders of 10% or more shares must report on the change to the number of shares held where the change is in relation to 1,000 shares or more.

In order to make a tender offer involving private equity-backed bidders, one must first publicly disclose the tender offer and file a tender offer statement and a prospectus thereof, which includes the following:

• matters concerning the tender offeror and related persons;
• the issuer of the securities subject to the tender offer;
• the purpose of the tender offer;
• the class and number of the securities subject to the tender offer;
• the terms and conditions of the tender offer, including the period, price and payment date;
• the provisions of a contract for purchase (or other transaction) of the securities without the tender offer after the public notice date of the tender offer, if such a contract exists; and
• the details of the purchasing fund and other matters prescribed by Presidential Decree as necessary for the protection of investors.

The FISCMA stipulates that a mandatory offer is triggered where a buyer and its affiliate(s) hold 5% or more of the shares issued by the target by purchasing shares from ten or more persons within a six-month period. This rule applies to purchases made outside the stock exchange; purchases made on the exchange other than through competitive trading (eg, after-hours block trades) are deemed off-exchange purchases for this purpose. Shares held by specially related parties, including affiliates and persons acting in concert, are aggregated, so shares held by other funds managed by the same GP or by portfolio companies may be attributed to a private equity bidder.

A broader mandatory tender offer regime has been under discussion since the Financial Services Commission announced its plan in December 2022, and several bills to amend the FISCMA to that effect are pending before the National Assembly as of August 2026. Although the bills differ in detail, most would require a person who, together with its specially related parties, comes to hold 25% or more of the shares of a listed company through purchases to make a tender offer for the remaining shares, either for all remaining shares or, under the opposition bill and a more recent governing party bill, for enough shares to bring the bidder’s aggregate holding to at least 50% plus one share. The bills also differ on grace periods, ranging from immediate effect to one year after promulgation, and on transitional provisions. If enacted, the regime would materially change the structure and funding requirements of acquisitions of controlling stakes in listed companies, and private equity buyers of listed targets have started to include provisions in share purchase agreements addressing the possibility that the regime takes effect between signing and closing.

In most cases, the consideration is cash. No minimum price rules apply to tender offers.

Until 2022, listed company transactions were rarely conducted via a tender offer. Most Korean listed companies have a controlling shareholder, and M&A transactions on such listed companies are conducted by purchasing shares over-the-counter from the controlling shareholder. Until recently, there have been rare exceptions of the buyer making a tender offer on the remaining shares following the above-mentioned transaction and going private. Over-the-counter transactions with a controlling shareholder include the same conditions as general private M&A; as such, financing is rarely included as a condition and the offer conditions cannot include those beyond the limited conditions allowed under the law (eg, certain portion of the shares to be tendered).

Since the first half of 2023, there have been several takeovers by private equity-backed buyers of listed companies by tender offer. A financing condition is not legally permitted since the tender offer statement must be accompanied by a document substantiating the balance of deposits in financial institutions or any funds pooled, equivalent to or more than the amount required for the tender offer.

If a bidder obtains sufficient shares to affirmatively resolve shareholder resolutions, it can acquire control through director appointments, even if said bidder does not obtain 100% ownership of a target. Upon obtaining controlling shares from the controlling shareholder of a listed company and subsequently obtaining 95% or more shares via a tender offer, the buyer can apply for voluntary delisting. In this case, the buyer must provide another opportunity to the remaining shareholders on settlement trading following the delisting.

On a related note, under Korean law, a controlling shareholder holding 95% or more shares may cash out the 5% shareholders by undergoing a certain procedure, which is not highly utilised in practice, but this process can be used in obtaining 5% or less shares following the voluntary delisting.

There are no particular mechanisms for a private equity-backed bidder to achieve a debt push-down into the target following a successful offer. That said, it should be noted that Korean courts have ruled that putting up the target’s assets for collateral relative to the debt of the parent (eg, acquisition financing) is considered a breach of fiduciary duty of the target’s board of directors. On a similar note, Korean courts have also found that merging the target following a successful offer with a highly leveraged parent may be considered a violation of these fiduciary obligations.

Irrevocable commitments of the kind used in the UK or continental Europe are not customary in Korea. Where a private equity-backed bidder launches a tender offer for a listed company with a controlling shareholder, the standard practice is instead to sign a share purchase agreement with the controlling shareholder before the offer is launched. That agreement is binding on the selling shareholder without a fiduciary out or an exception for a superior offer, and is disclosed in the tender offer statement (see 7.2 Material Shareholding Thresholds and Disclosure in Tender Offers). Undertakings to tender from other principal shareholders are rare.

Incentivisation of the management team is a common feature of private equity transactions, and the incentive can take the form of both cash and equity. Equity incentivisation by equity-linked compensation is commonly found in private equity transactions.

In general, equity ownership is not common for the management team; even if there is such ownership, the ratio is very low. However, it is common for a private equity fund to:

• acquire most of the equity from the founder of an unlisted company, with the founder retaining some of the remaining equity and continuing to manage the company; or
• cause the founder/seller of an unlisted company to reinvest in the fund on a basis subordinated to the other investors in respect of distributions while continuing to manage the company.

For the reasons raised in 8.1 Equity Incentivisation and Ownership, it is rare for managers to hold equity. Even if there is equity ownership, it is generally not structured as sweet equity or institutional strip. Equity tends to be granted to management by the grant of stock options or cash incentives that are linked to performance and/or future exit considerations of the private equity buyer.

For the reasons provided in 8.1 Equity Incentivisation and Ownership, there are no typical leaver or vesting provisions. In the case of stock options, there is a statutory requirement of being in service for at least two years; the exercise period is generally determined to begin two to three years from the grant date, until the fifth year therefrom. Equity-linked compensation, such as restricted stock units, often takes the structure of vesting over the course of around five years, depending on the performance of the company or the individual.

It is customary to agree to restrictive covenants on non-compete and non-solicit undertakings during the term of employment and for a certain period following resignation. However, there is no clear standard on the length of this period under Korean law.

As the non-compete undertaking can raise an issue concerning infringement of the constitutional right to profession, the risk of invalidation of this undertaking can be minimised where the consideration corresponding to the non-compete undertaking can be proved and the undertaking is not in place for an excessive duration. Although this undertaking is determined on a case-by-case basis, it is understood that the validity thereof is likely recognised for six months to one year, and the validity of any period exceeding one year may not be so readily recognised. Such undertakings are often stipulated in employment contracts.

For the reasons provided in 8.1 Equity Incentivisation and Ownership, manager shareholders do not generally enjoy any protection other than tag rights, and do not carry any substantive influence over the exit or control of the private equity fund. However, depending on the equity ratio and importance in company business of the manager shareholders, matters of protection or influence can be settled differently. If the manager shareholder holds a high equity ratio and is key to the company business, rights akin to a minority shareholder’s rights in a joint venture could be negotiated for the manager shareholder, including anti-dilution protections.

Private equity fund shareholders with majority shares tend to exercise de facto control over the portfolio companies by appointing directors.

On the other hand, where a fund invests as a minority shareholder, it is typical for the fund to enter into a shareholders’ agreement with the controlling shareholder and obtain the right to appoint at least one person to the board of directors, veto rights over major management matters, and information rights.

Veto rights vary on a case-by-case basis, but funds tend to demand veto rights over change to capital or governance structure or transactions concerning assets, capital expenditure or loans, or related-party transactions, over a certain monetary threshold. However, if the largest shareholder seeks to consolidate its accounts with those of the target company, the consultation on veto rights tends to centre on pure minority protection rights, excluding matters on business plans, budgets, the appointment of representative directors and other ordinary business activities (as veto rights on such operational matters granted to the fund could be seen as stripping control of the largest shareholder, thereby undercutting its efforts to consolidate accounts with the target company).

The Korean Supreme Court interprets the circumstances where the corporate veil may be pierced very narrowly, and courts are very hesitant to do so where the portfolio company is operated in compliance with the general procedural requirements of corporate governance.

In one case, the court held that it is natural for overlaps to exist between the personnel of a parent company and those of its subsidiaries. The mere fact that the executive management team of the parent company holds similar positions in its subsidiaries, or that the parent company exercises control by virtue of owning all of the issued shares of its subsidiaries (or even that the subsidiaries’ businesses and operations have expanded without their capital being increased), is not sufficient reason to view such relationships as being an abuse of separate legal personalities (ie, corporate veil) in relation to obligations owed by subsidiaries to creditors – something more fundamental is required for such abuse to be seen, like the total absence of a subsidiary’s independent existence or will to operate whereby its operations are essentially run by the parent company as part of the parent company’s own business.

In particular, it must be objectively apparent that the business and assets of the parent company and those of its subsidiaries, including as to external commercial transactions, cannot be distinguished or clearly separated. In addition, there must be a subjective element present – namely an intention to avoid the application of law to the parent company or the intention to abuse the corporate veil by utilising the subsidiaries as a purely credit-proofing measure in dealing with creditors.

Until several years ago, while there were no explicit regulations, the KRX did not allow the listing of companies in which the largest shareholder was a private equity fund and, accordingly, the exit strategy of private equity funds was limited to a private sale. However, today, the KRX allows IPOs of these companies, and IPO precedents are building, with a growing number of funds targeting an IPO as their key exit strategy. This is most applicable to investments to obtain control of the target because, for minority investments in a target expected to conduct an IPO in the near future, the exit strategy becomes more complex, with:

• partial sales of shares pre-IPO;
• sale during the IPO; and
• sale of the remaining shares in a post-IPO block deal.

Although infrequent in practice, there are instances where a partial exit is accommodated through recapitalisation prior to the final sale and/or IPO of the target. Subject to the individual circumstances of the target and the relevant private equity funds involved, the most preferred exit strategy will often be employed, whether that be in the form of a private sale, IPO or recapitalisation, and it is uncommon to concurrently pursue a dual or triple track exit.

IPO exits of subsidiaries of listed companies have, however, become more difficult. In March 2026, the government announced that duplicate listings (ie, the listing of a subsidiary of a listed company) would be prohibited in principle and permitted only by exception, and in August 2026 the KRX published implementing guidelines. The board of the listed parent must now evaluate the impact of the listing on its own shareholders, adopt shareholder protection measures, consult its shareholders or obtain their approval, approve the listing after review by an independent special committee and disclose each step, and the KRX applies stricter review criteria to the subsidiary’s independence from the parent. Parent shareholder approval, with the voting rights of large shareholders capped at 3%, is mandatory where the subsidiary was created by a physical spin-off and is recommended in other cases, and the guidelines state that a listing pursued mainly to satisfy an IPO undertaking to, or to provide an exit for, a financial investor will be reviewed more strictly. Private equity funds holding minority stakes in subsidiaries of listed companies therefore need to reassess the feasibility of an IPO exit.

Reinvestment Upon Exit

Generally, private equity sellers incorporated under Korean law do not reinvest upon exit.

It is not typical for a private equity fund holding a controlling stake of 50% or greater to also hold drag rights against the minority shareholders for its exit. However, where the existing largest shareholder or management remains as a minority shareholder, there are instances of the fund seeking drag rights and, in turn, the minority shareholders seeking tag rights. On a separate note, in an M&A transaction involving a consortium between private equity and a strategic investor, the private equity fund often seeks drag rights that can force the strategic investor to sell its shares at the time of the fund’s sale of its shares carrying management rights.

Conversely, where the fund makes a minority investment, it often seeks drag rights against the controlling shareholder in preparation for any potential failures to exit via an IPO or other primary exit mechanisms (eg, failed put option).

In the scenarios presented in 8.1 Equity Incentivisation and Ownership where the founder remains as a controlling shareholder, or where the private equity fund makes a minority investment, it is typical practice for the minority shareholder to hold tag rights in the case of the controlling shareholder’s disposition of shares that carry management rights. Although thresholds are not typically prescribed for tag rights (ie, prorated tag-along), change of control is a common threshold (eg, where 50% or more of the shares of the target are disposed by the controlling shareholder).

Under the KRX regulations, a mandatory lock-up obligation is imposed for six months where shares were acquired from a company conducting an IPO, or the largest shareholder and its affiliates thereof, within one year from the date of the company’s application for preliminary examination for listing.

However, if the relevant market is the KOSDAQ market rather than the KRX market, the mandatory lock-up period is shortened to one month for private equity funds even if the relevant acquisition was made as above.

As discussed under 10.1 Types of Exit, until several years ago the KRX did not allow the listing of companies in which the largest shareholder was a private equity fund, but it now allows IPOs of these companies, and private equity-led IPOs are no different. Relationship agreements between the private equity seller and the issuer are not customary in Korea; post-IPO governance is instead governed by the issuer’s articles of incorporation and the KRX listing rules.