Global private equity firm Affinity Equity Partners, which is attempting to acquire LOTTE Rental, the number one car rental company in the domestic market, is only awaiting government approval. Affinity also owns the second-largest company, SK Rent-a-Car, leading to concerns among employees of the two companies about potential restructuring in the future.
According to industry sources on the 25th, LOTTE Rental is currently undergoing a business combination review by the Fair Trade Commission ahead of Affinity's acquisition. The review is expected to conclude by July or August of this year, but there are predictions that the approval may be delayed due to the overlapping of the early presidential election phase.
A variable in the review process is the concern over monopoly in the domestic rental car market. Although the combined market share of LOTTE Rental and SK Rent-a-Car does not exceed the 50% threshold defined by current law as a dominant market player, the gap with peripheral companies is expected to widen.
As of the first quarter of this year, the domestic rental car market is comprised of LOTTE Rental (20.4%) and SK Rent-a-Car (15.5%), which together account for 35.9%. Hyundai Capital (12.5%) and Hana Capital (6.7%) follow behind. The remaining 44.9% consists of small and micro-sized companies.
Employees have been promised job security from Affinity, but management is expected to undergo some changes. This is because the company has gained insights into the domestic rental car industry structure and characteristics through SK Rent-a-Car, meaning that many personnel may not be necessary.
Affinity completed the process of changing the largest shareholder of SK Rent-a-Car last August and appointed a new CEO and Chief Financial Officer (CFO). Lee Jeong-hwan, CEO of SK Rent-a-Car, has experience leading Yogiyo, the company where Affinity is the largest shareholder. LOTTE Rental is now led by Choi Jin-hwan, who joined from SK Broadband, starting in 2023.
While there is optimism that performance and stock prices will accelerate, anxiety is growing among employees about potential restructuring in the medium to long term. Private equity firms must enhance the value of the acquired company for resale, which means they might inevitably proceed with personnel reductions, expense cuts, and organizational restructuring.