Innovative platform companies that have grown rapidly in the midst of the COVID-19 crisis are flocking to the restructuring corner one following another. As the economy suddenly froze, the phenomenon of ‘hardening of money’ is intensifying, centering on platform companies that have stalled in growth. Loss grew and money was tight, and some founders were faced with a situation where they had to give up their management rights. There is an analysis that the market for restructuring for the survival of platform companies is opening up.
According to the investment banking (IB) industry on the 17th, innovative platform companies that were valued from hundreds of billions to several trillion won have appeared in the M&A market one following another. Representative examples include Ticket Monster (Tmon), a first-generation e-commerce (e-commerce) platform, Watcha, a native online video service (OTT) company, and Mesh Korea, an operator of the delivery service platform Booreung. What they have in common is that ‘anti-compulsory M&A’ is in progress rather than a voluntary sale of management rights.
Platform companies in the e-commerce and content fields such as 11st, Brandy, Curly (Market Kurly), Oasis, Balan, and Lidy (Ready Books) are pursuing an IPO or investment attraction. There is also a forecast that it cannot be ruled out that many of these companies fail to attract IPOs or investment and thus appear in the market for selling management rights. Soka, Curly, etc. are proceeding with IPOs in a ‘crying and eating mustard’ way, despite the ‘ransom price’ falling to less than half. This is proof that raising funds through an IPO is so urgent.
Until last year, platform companies were flooded with investments along with the government’s policy to foster venture capital. This year, as the global economy slumped and liquidity plummeted, the mood changed. Many platform companies have almost exhausted the money they have raised, but as it becomes difficult to attract additional funds, the lights are on.
If it is not the No. 1 platform, the winds for restructuring are expected to intensify. The president of a securities company said, “It can be seen that only Naver survived the dot-com bubble in the early 2000s and many Internet companies closed their doors.
“No. 1 or subject to restructuring”… Timon, Watcha, etc. ‘survival M&A’ flocked
Platform financial difficulties in ‘money environment’… Loss piled up and growth slowed
Mesh Korea, famous for its delivery service platform ‘Bureung’, has experienced rapid growth during the Corona crisis since its establishment in 2013. Last year’s sales (303.8 billion won) grew tenfold from 2017 (30.1 billion won). It has emerged as an innovation platform and has attracted more than 120 billion won in funds.
Things have changed drastically this year. As sales growth slowed last year and operating losses surged from 17.8 billion won in the previous year to 36.5 billion won, question marks began to appear on the growth potential. When the accumulated deficit exceeded 110 billion won and the money line dried up, he borrowed money from the second financial sector. It is known that the company decided to sell its management rights instead of attracting investment as concerns grew that the founder’s stake, which was entrusted as collateral, might be sold.
A number of platform companies are experiencing financial difficulties. Timon, Watcha, etc. It’s a place you can recognize just by name. It has been increasing sales and size by attracting funds and expanding investment every year, but this year, the virtuous cycle has been broken due to the economic downturn and reduced liquidity.
○Cash-drying deficit platform
According to the investment banking (IB) industry and the Financial Supervisory Service on the 17th, Tmon, which was considered a representative e-commerce company, recorded 129 billion won in sales last year, down from 151.2 billion won a year ago. After the Kohlberg Kravis Roberts (KKR)-Anchor Equity Partners consortium acquired it in 2015, it poured investment, but failed to close the market share gap with Coupang.
Again, the deficit widened. Last year’s operating loss was 76 billion won, worse than 63.1 billion won a year earlier. It is estimated that the ransom price of Timon, which was once valued at close to 2 trillion won, has fallen to around 200 billion won. It is known that it is currently negotiating a sale with Singapore e-commerce company Q10, but it is unclear whether the transaction will be successful.
An official from a private equity fund (PEF) said, “There is talk that Tmon will run out of cash within three months.
As the number of users of WeMakep, a competitor, continues to decrease, rumors of a crisis continue. Sales last year (244.8 billion won) plunged 36% from the previous year. The market continues to raise the possibility of selling WeMakep.
The local online video service (OTT) Watcha also had a ‘money line’ blocked. Following Netflix, Disney and Coupang Play have joined, and the space to stand is narrowing. Last year’s sales (708 billion won) nearly doubled, but the operating loss (24.8 billion won) increased by 10 billion won. It is known that Watcha has begun reducing its workforce, including receiving voluntary retirement from its employees. This is the reason why it entered the ‘survival merger and acquisition (M&A)’ market this year as it was blocked from attracting funds.
The financial difficulties of small and medium-sized platforms are more serious. Today’s Table, which operates the same-day seafood delivery platform ‘Today’, is suffering from financial difficulties to such an extent that it cannot settle regarding 5 billion won to be paid to its partner companies. Bank Salad, a fintech company, posted an operating loss of 41.9 billion won on sales of 3.4 billion won last year. Operating losses were more than 10 times larger than sales.
○When the bubble is extinguished, the merger will begin in earnest
Where sales are continuing to increase, there is a way to raise funds through an initial public offering (IPO). However, the ransom fell to less than half of its peak. Ride-sharing company Socar lost its box office success in the IPO demand forecast, but lowered the ransom to less than 1 trillion won and went public on the 22nd. Market Kurly is also expected to push for an IPO even if the ransom price, which once hit 4 trillion won, has fallen to the 1 trillion won level. As venture capitals and PEFs’ pre-IPO investment (pre-IPO) stops, it is expected that such ‘crying and eating mustard’ IPO cases will follow.
If it is not a No. 1 platform, a conservative view is growing. An executive at a securities company said, “From now on, platform companies will begin to cover the boulders. An official from a pension fund said, “These days, when it comes to platform companies, everyone hits their hands.
There is also concern that the nightmare of 2001, when the dot-com bubble burst, might be repeated. At that time, many Internet companies such as Empas and Lycos closed their doors, except for Naver, which ranked first.
Some argue that it is different from the past. Although PEFs and venture funds have raised bubbles as they continued to invest in series, this is because there are many examples of innovative services for consumers in various platform fields in real life.
An IB industry official said, “Conglomerates in distribution are looking at platforms that can complement the online sector.
Reporter Chaeyeon Kim why29@hankyung.com
