In 20 months, a buyout netted 3 billion yuan.

Investment Circle has learned that KKR recently plans to acquire Samhwa, a well - known South Korean cosmetics packaging material manufacturer (commonly referred to as "Sanhe" in Chinese), for 800 billion won (approximately 4.16 billion yuan), creating a major merger and acquisition in the Asian market this year.

However, on the other side of the story, the seller, TPG, is about to make a huge profit. As early as 2023, TPG spent about 1.5 billion yuan to buy Samhwa from the founding family and then carried out a series of transformation and upgrading. Now, TPG has sold all its shares to KKR and achieved an exit.

In just 20 months, TPG has achieved amazing returns. Obviously, for PE firms to truly make money, they still have to rely on buyouts. This scenario is highly inspiring in the current context.

An Invisible Champion in Pump Heads Is Sold, with KKR and Blackstone Competing

The protagonist of this merger and acquisition case, "Samhwa", started from an inconspicuous plastic bottle cap workshop.

In 1977, Park Jong - soo (the father of the current chairman Park Seong - jae) founded Samhwa in Seoul. Initially, it only provided aluminum spray heads for local perfume brands. In the 1990s, with the rise of the South Korean makeup market, Samhwa seized the opportunity to expand its production line to lotion pumps and welcomed new business.

The turning point came in 2007. At that time, Samhwa developed the "micron - level dosage control pump". The uniqueness of this control pump lies in its ability to precisely control the error of the single - liquid output within the micron level of ±0.01ml, greatly improving the accuracy of cosmetic packaging and the user experience.

Soon, Samhwa became the "Pump King" in the South Korean market.

What impressed the outside world deeply is that Samhwa once won a 10 - year global exclusive supply contract from the Estée Lauder Companies. Currently, Samhwa is one of the three major manufacturers of cosmetic containers and press pumps in South Korea. It has successfully expanded its product line to various beauty packaging materials such as lotions, creams, cushions, and foundations. The company maintains long - term cooperation with international beauty companies, and nearly 60% of its sales come from beauty giants such as L'Oréal, Estée Lauder, and LVMH.

Samhwa also set its sights on the Chinese market: In 2018, it invested in building a factory in Shanghai, and its wholly - owned subsidiary, Samhwa (Shanghai) Packaging Products Co., Ltd., officially started operations.

In recent years, with the global popularity of K - Beauty (Korean - style beauty), Samhwa's business has become full of imagination. In November 2023, private equity giant TPG acquired 100% of the equity of Samhwa and its four affiliated companies at a purchase price of about 300 billion won (approximately 1.557 billion yuan at that time).

After the acquisition, TPG promoted a series of management reforms at Samhwa. In less than two years, Samhwa's value doubled, and it once again became a target for capital competition.

Unexpectedly, the small pump heads attracted the competition of PE giants. It is reported that KKR, Blackstone, and Carlyle Group all participated in the bidding, and finally KKR impressed TPG with a higher price. The newly finalized Share Purchase Agreement (SPA) shows that TPG will sell all its shares to KKR, and the latter will also obtain the exclusive management right of Samhwa.

Victory for PE, TPG Makes a 3 - Billion - Yuan Profit

For TPG, this buyout has brought substantial profits -

It is reported that through this sale, TPG will receive a return of about 900 billion won (approximately 4.653 billion yuan) including dividends. Calculated in this way, from the acquisition in November 2023 to the signing of the sale agreement in July this year, in just 20 months, TPG achieved a substantial profit of over 3 billion yuan.

This can be regarded as a classic buyout case in the Asian private equity market in recent years.

In less than two years, Samhwa's valuation increased nearly three times. What did TPG do? Many PE peers have begun to study it carefully.

For any buyout, the purchase is always just the first step, and the subsequent integration is the highlight. TPG's operation is not complicated. First, it shed the burden and expanded its advantages.

Before TPG's acquisition, half of Samhwa's revenue still came from ordinary plastic bottles with low profit margins, resulting in an EBITDA profit margin of only 12%. Perhaps seeing the huge room for improvement, after the acquisition, TPG focused on and strengthened Samhwa's core competitiveness in the field of press pump technology, drastically cut the product line from 1,200 ordinary bottle types to more than 400, concentrated resources on high - margin precision pump heads, and improved the profit margin.

At the same time, TPG closed the old South Korean factories with high labor costs and low efficiency and turned to build automated production lines in Vietnam, Mexico and other places. Subsequently, Samhwa's single - piece labor cost decreased by 38%, greatly improving production efficiency and cost advantages.

Second, it carried out the transformation and upgrading of the company's management. Samhwa was originally a family - owned enterprise with the common problems of slow decision - making and lack of innovation in family - owned enterprises. TPG introduced Lee Sang - min, the former general manager of the packaging division of LG Household & Health Care, as the COO, and Kim Eun - joo, the former vice - president of global procurement at Cosmax, as the CPO. A more professional and market - oriented management team flattened the process and improved R & D efficiency.

To adapt to the new market environment, Samhwa also launched the PumpLab customization platform in 2024. This platform allows small and medium - sized independent brands to complete the mold opening and sample making of pump heads within 72 hours, greatly shortening the customization cycle and increasing the average customer order value by 60%. The customers have successfully expanded from large brands to small businesses, covering a wider market.

According to foreign media reports, a Seoul banker familiar with the deal said: "TPG found a professional company with world - class technology in a low - profile industry and turned it into a landmark asset."

In short, TPG found a project with a low valuation, enhanced the company's potential, and then sold it again.

TPG bought and sold within 20 months and secured the profit. As Henry Kravis, one of the founders of KKR, once said, "Don't congratulate us when we complete the acquisition. Wait until we exit."

Buyouts Are Heating Up

This scenario once again makes people sigh: Even in a sluggish global environment, PE firms can always make big money through buyouts and smoothly navigate through the economic cycle.

The so - called buyout, or "controlling acquisition", refers to the purchase of a majority or controlling stake in a company, followed by drastic reforms such as restructuring the business and cutting costs to increase the value of the target asset. With such high thresholds, buyouts have always been regarded as the pearl on the crown of the investment industry.

Looking at the rise history of global investment institutions, buyouts have almost become a standard. In times of economic downturn, buyouts tend to be more active because most projects are at the bottom of their valuations.

Currently, buyouts are heating up. Remember, since last year, the Swedish private equity firm EQT raised a $1.6 billion buyout fund, more than three times oversubscribed; Carlyle completed its fifth - generation $2.8 billion Japanese fund; Silver Lake raised a record - breaking $20.5 billion acquisition fund.

Since this year, we have witnessed continuous scenes of domestic and foreign PE firms competing.

Another sensational deal by KKR is the acquisition of Dayao, a well - known Chinese soft drink brand. Not long ago, according to the publicity of the Chongqing Administration for Market Regulation, the "case of KKR's acquisition of the equity of Vision International Limited" has been approved. Vision International is said to be an affiliated company of Dayao.

Investment Circle has confirmed from the inside of a well - known Beijing PE institution that in fact, Tencent also showed great interest in acquiring Dayao and even formed a special project team. In addition, several foreign PE institutions also competed, but finally KKR remained at the negotiation table and is about to acquire 85% of the equity of Vision International.

For a long time, domestic buyouts in China have been in their infancy. Until this year, we have begun to see the emergence of some large deals:

In January this year, Sequoia China and Marshall Group announced a final agreement to acquire a majority stake in Marshall at a valuation of 1.1 billion euros (approximately 8 billion yuan);

Subsequently, DCP Capital acquired 73.66% of the equity of Sun Art Retail Group (the parent company of RT - Mart) held by Alibaba for HK$13.1 billion; in April, Dazheng Capital announced the completion of the acquisition of Juratec Suzhou and its global subsidiaries and affiliated enterprises.

The spark is starting to spread.

Buyout is an extremely complex systematic project with a very high probability of failure. There is a well - known saying in the overseas investment circle: "Any fool can buy a company, but what really matters is what happens after the acquisition." In other words, being able to buy good assets is just the beginning of a buyout, and the real test lies in post - investment operations.

At the same time, each buyout involves billions or even tens of billions of dollars, and the cost of trial and error is high, which is a great test of courage. As Greg Mondre, the co - CEO of Silver Lake, said:

"The returns are substantially higher when the bets are bigger."

The bigger the waves, the more valuable the fish.

This article is from the WeChat official account "Investment Circle" (ID: pedaily2012), author: Yang Jiyun, published by 36Kr with authorization.