Kibo, defense industry association team up to support M&A succession for defense SMEs

Korea Technology Finance Corporation will support mergers and acquisitions for small and medium-sized defense companies struggling with succession due to a lack of heirs, aiming to prevent the loss of technology and production capabilities those firms have built up.

Kibo announced Friday that it signed a mutual cooperation MOU with the Korea Defense Industry Association on Thursday at its Seoul office to promote M&A activity among defense small and medium-sized enterprises.

Under the agreement, the Korea Defense Industry Association will identify member companies — roughly 800 in total — that are looking to sell or acquire, and refer firms in need of acquisition financing to Kibo. Kibo will in turn provide M&A consulting and brokerage services to those companies and plans to support acquisition financing through M&A guarantees.

The two organizations also plan to facilitate M&A deals that combine the innovative technologies of startups with the manufacturing capabilities of established defense firms, in addition to supporting succession for defense small and medium-sized enterprises facing continuity challenges due to the absence of heirs.

Kibo currently operates an M&A transaction information network and a corporate succession M&A matching system through its Smart Tech Bridge platform. It also has a framework in place — linked with private M&A partners — that covers the full process from identifying companies to consulting, brokerage and financial support.

Kibo is also expanding financial support for corporate succession M&A. In August, it signed an agreement with Shinhan Bank to supply guarantees totaling 41.4 billion won ($31.1 million) — comprising 20 billion won in special contribution agreement guarantees and 21.4 billion won in guarantee fee support agreement guarantees.

The special contribution agreement guarantees raise the guarantee ratio from 85 percent to 100 percent over three years and reduce the guarantee fee by 0.3 percentage points. Under the guarantee fee support agreement, Shinhan Bank covers 0.7 percentage points of the guarantee fee for two years.

"Defense small and medium-sized enterprises need to actively leverage M&A to preserve the technology and business capabilities they have built up and to secure new growth opportunities," said Executive Director Kim Nam-jae of Kibo. "We will expand brokerage and financial support through cooperation with related organizations to ensure smooth M&A transactions between companies."