As the Korean Wave spreads worldwide, interest in K-food is growing year by year. Dried seaweed and seasoned seaweed, nicknamed "black semiconductors," are no exception. The assessment that "the texture is strange, like eating paper," has disappeared, and they consistently make the list of must-buy gifts for foreigners when they visit Korea.
With the popularity of seaweed at such a high level, the industry reported on the 17th that seaweed manufacturing companies are increasingly entering the mergers and acquisitions (M&A) market. Sung Gyung Food and Gwangcheon Seaweed, located in the Chungcheong region, are representative examples. There are some puzzled opinions. Given the current atmosphere, seaweed manufacturers are often seen as "geese that lay golden eggs," so why are they selling? There are several reasons for this.
First of all, inheriting the family business is complex and difficult. The first to enter the M&A market was Sung Gyung Food, which manufactures and sells Sung Gyung seaweed. Sung Gyung Food was sold in 2017 for a value of 150 billion won to Affirma Capital (then SC PE). The background for the sale of Sung Gyung Food to a private equity (PE) firm was related to inheritance issues. There was no suitable person to continue the management. An M&A industry insider noted, "The founder's second generation was involved in management, but due to health issues, it was decided to sell management rights to a private equity firm."
Recently, Gwangcheon Seaweed, which has also come up for sale, is a similar case. It was known to have a strong attachment to the brand, even using the representative's son as a model, but inheritance tasks related to tax issues have not been easy. To pass down the family business, there must be someone to take over, and it takes more than 10 years to plan and execute equity adjustments. However, a representative from Gwangcheon Seaweed stated, "We are not considering selling management rights and are looking for investors for factory establishment and other purposes."
For seaweed manufacturers to grow with the K-food boom, they need capital and systems, which is not easy for the founders to establish gradually. Seaweed manufacturers often start as small local businesses and grow larger. To enhance their value once again in times like these, they must be more proactive about exports. Large-scale investment in facilities and marketing budgets is necessary. It is also essential to recruit talented personnel to implement well-structured plans.
However, regional seaweed manufacturers find it difficult to attract talent and raise capital to equip facilities and systems. A private equity insider stated, "It is difficult to find manpower, and the owner realizes there are limits to managing all of this themselves, which is why they are trying to sell when the market focuses on them." In fact, at the time Sung Gyung Food was acquired by Affirma Capital, its overseas sales accounted for less than 1%, but recently that figure has risen to over 40%.
Another reason is that many parents choose to pass on their businesses as a form of financial investment rather than handing down manufacturing operations, believing it is less burdensome. A wood business founder in the Chungcheong region remarked, "Currently, my son and daughter-in-law have come down from Seoul to operate the business with me, but I wonder if I should pass this on to my grandchildren," adding, "It seems that the financial sector offers less hardship and more profitability than manufacturing."
In the past, there were many instances where people felt guilty about selling their family businesses, but that is no longer the case. Many successful cases have emerged, and numerous financial and securities programs are available to manage the proceeds from the sale. A representative case is Company A, which inherited the family business in 2018 but sold it to a foreign company. The sale amount was substantial enough to attract market attention, and the former owner transformed into an unlisted investor, becoming a larger asset holder than when they operated the family business. In the process, their children entered the venture capital (VC) industry.
A representative from Mirae Asset Securities' family office center noted, "Many are looking to invest their sale proceeds to grow their assets," adding, "In this process, children meeting certain conditions naturally find their way into the VC or private equity sectors."
A representative from a local chamber of commerce stated, "Listening to the stories of those planning to sell their companies, initially, there’s a consideration of passing it down, but the thought often shifts to a preference for a more comfortable life over the honor of being a regional company," highlighting the reason why the seaweed industry is being sold to private equity firms.
However, there are voices of concern regarding the phenomenon of management rights for regional manufacturers being handed over to private equity. An entrepreneur stated, "We need to reflect on whether private equity truly possesses 'entrepreneurial spirit' when operating companies," emphasizing that the strengthening of the financial sector should not lead to the weakening of manufacturing, a trend that has been increasingly observed lately.