M&A Guide

Understanding M&A

A comprehensive M&A guide for business owners, presented by KPMG M&A Center.

What Is M&A?

M&A is the umbrella term for transactions that change who owns a company or where its business boundaries lie.

KPMG Tip

In practice, M&A centers on share, asset, and business transfers and mergers, and more broadly covers joint ventures, strategic alliances, and restructuring.
Demand for mid-cap and SME M&A in Korea is growing on three structural drivers: succession gaps, the pace of industry reshaping, and abundant acquisition capital.
The standard process runs in four phases — preparation → marketing and preliminary diligence → confirmatory diligence and SPA → closing — and typically takes 6 to 10 months.
Confidentiality is the first rule of process design. A sale rumor unsettles key employees and customers before anything else.

1.1 Definition and Scope of M&A

M&A combines “merger” and “acquisition.” Narrowly it covers share transfers, asset transfers, and mergers; broadly it extends to joint ventures, strategic alliances, restructuring, and backdoor listings. What they share is that the transaction changes who owns the company or where its business boundaries lie. For a buyer, M&A is a way to buy time and capability; for a seller, it connects the company to new capital and networks while converting the value the owner has built into a market price.

Strategic Purposes of M&A

GrowthBuyer — buying time, capability, and market

SuccessionOwner — alternative to family succession

→

RealizationBuilt-up value realized at market price

PerspectiveA well-timed sale is not “giving up” — it can be the rational choice for both the company and its owner.

1.2 Why This Is the Era of M&A

Three structural drivers are expanding M&A demand in Korea. ① Succession gaps: with founders aging and inheritance and gift taxes weighing on family succession, more owners are considering a third-party sale instead. ② The pace of industry reshaping: when technology, regulation, and demand shift quickly, organic growth alone is too slow, so inorganic growth through acquisitions and alliances has become a default strategic option. ③ Acquisition capital: private-equity firepower and large corporates’ appetite for new businesses support the buy side. Growth strategy ultimately comes down to how flexibly organic and inorganic growth are combined.

Three Structural Drivers of M&A Demand

Succession gap

Aging founders and inheritance/gift tax → more third-party sales

Pace of industry reshaping

Shifts in technology, regulation, and demand → organic growth alone is too slow

Acquisition capital

PE firepower + corporate appetite for new businesses

Corporate growth = organic growth + inorganic growth (M&A and alliances)

MarketOne in three SME owners is considering succession to a third party rather than to their children (KOSI).

1.3 Types of M&A

By form of combination, M&A is ① horizontal (acquiring a competitor in the same industry to expand market share), ② vertical (acquiring upstream or downstream players in the supply chain, such as suppliers or distributors), or ③ conglomerate (entering a different industry to diversify the portfolio). Cross-border deals are driven by ① securing overseas sales networks and production bases, ② acquiring core technology, and ③ entering new businesses; for sellers, foreign strategic buyers sometimes offer higher multiples than domestic buyers. Currency, foreign-investment and export regulation, and cultural-integration risks must be built into the structure from the outset.

M&A by Form of Combination

Horizontal M&A

Acquiring competitors and expanding market power

Same-industry merger

Vertical M&A

Acquiring upstream/downstream supply-chain companies

Raw-material and distribution integration

Conglomerate M&A

Entering new areas and diversifying risk

Cross-industry expansion

Cross-border M&A

Overseas markets and production bases · core technology · new businesses — and, for sellers, a chance at higher multiples

MarketIn 2026, a more complex tax/regulatory environment is reinforcing a “selective review” stance.

1.4 A Standard M&A Process and Timeline

No statute prescribes the process, but in practice it runs in four phases. ① Preparation (about 1.5 months: advisor selection, deal structuring, IM and NDA preparation); ② investor marketing and preliminary diligence (1–2 months: tapping list, teaser distribution, shortlist); ③ confirmatory diligence and SPA negotiation (2–3 months: management presentation, break-out sessions, SPA signing); ④ closing (about 3 months: satisfying conditions precedent, payment of the balance). Six to ten months is the baseline; buyer-side approvals and regulatory reviews can extend it.

Four-Stage M&A Process (6-10 Months)

Step 1

Preparation

Advisor selection, deal structure, IM, NDA

1.5 months

Step 2

Marketing and Preliminary Diligence

Tapping list, teaser, shortlist

1-2 months

Step 3

Confirmatory Diligence and SPA

Management presentation, binding offer, detailed terms, SPA signing

2-3 months

Step 4

Closing

Conditions precedent, final payment, transaction close

Around 3 months

CaseTimelines hinge on external variables such as buyer approvals and merger review. One KPMG project ran 35 weeks beyond the original plan.

1.5 Frequently Used M&A Terms

These are the core terms that recur throughout M&A practice: NDA (non-disclosure agreement), Teaser/IM (anonymized summary / detailed information memorandum), LOI (letter of intent), MOU (memorandum of understanding), SPA (share purchase agreement), SHA (shareholders’ agreement), BTA (business transfer agreement), VDR (virtual data room), Exclusivity (exclusive negotiation right), and MP/BO (management presentation / break-out sessions). As the process advances, the scope of disclosed information widens and the documents become more legally binding. LOIs and MOUs are usually of limited binding effect, but their confidentiality and exclusivity clauses are typically made binding.

Core M&A Terms

NDANon-disclosure agreement — commitment to keep discussions confidential

Teaser / IMAnonymous company teaser / detailed information memorandum

LOILetter of intent — formal expression of acquisition interest and terms

MOUMemorandum of understanding — preliminary agreement before the definitive contract

SPAShare purchase agreement — definitive contract for an equity transaction

SHAShareholders agreement — rules for shareholder rights and obligations

BTABusiness transfer agreement — transfer of a business unit

VDRVirtual data room — disclosure of materials to verified bidders

ExclusivityExclusivity right

MP / BOManagement presentation / small-group deep-dive Q&A

CapabilityTeasers go out fully anonymized; the IM is shared only after interested parties sign an NDA.

1.6 Choosing the Sale Method

There are three ways to run a sale: ① an open auction (many bidders maximize price, but exposure risk is high), ② a limited auction (competition among a few selected bidders, balancing confidentiality and competitive tension), and ③ a private negotiation (one counterparty; best for confidentiality, but the lack of competition weakens leverage). Whichever route is chosen, confidentiality is the first rule. A sale rumor triggers key-employee departures and customer anxiety, which directly erodes enterprise value.

Trade-offs Across Three Sale Methods

Sale method	Competition	Confidentiality	Features
Open auction	★★★	★	Maximizes price but raises exposure risk
Limited auction	★★	★★	Balances confidentiality and efficiency; common in practice
Private negotiation	★	★★★	Prioritizes secrecy but weakens negotiation leverage

First principle — confidentiality.

CapabilityProject code names, strict NDAs, and disciplined VDR operations are essential to minimize information exposure.

KPMG by your side

The KPMG M&A Center, Korea's largest M&A advisory organization, delivers the entire M&A lifecycle through a single point of contact — sell-side and buy-side advisory, cross-border deals, valuation, due diligence, and PMI.

Industry, financial, tax, and legal specialists come together as one team to design the answer from the most fundamental questions: what to sell or acquire, how, and to whom.

If you are considering an M&A transaction or preparing for an eventual exit or succession, we recommend starting with an informal early-stage consultation.

Contact KPMG

Preparing for M&A

The best price is built through pre-sale fundamentals improvement.

KPMG Tip

Valuation cross-checks the income, market, and cost approaches to arrive at a price range — the output is a range, not a single number.
The working benchmark is the EV/EBITDA multiple. Derive it from listed peers and recent transactions, but remember it yields enterprise value; net debt must be deducted to reach what shareholders receive.
Pre-sale conditioning — divesting non-core assets, proving recurring revenue, reducing customer concentration, and financial transparency — drives the final price.
Taxes and the liabilities that transfer differ by structure (share, asset, or business transfer; spin-off), so early structuring is critical.

2.1 Fundamentals of Enterprise Valuation

Business value is assessed using three approaches: ① the income approach (DCF: discounting future free cash flows at the weighted average cost of capital, or WACC); ② the market approach (comparing valuation multiples of comparable listed companies under GPCM and comparable transactions under GTM); and ③ the cost approach (restating assets and liabilities at market value).These approaches rarely produce identical results, and the differences themselves often serve as the starting point for negotiations. How buyers and sellers define the business can influence both the WACC and the peer groups selected for GPCM and GTM. Their views of the company’s future also shape the cash flow projections used in the DCF analysis.
Valuation, therefore, is not about finding a single correct answer. It is a tool for establishing a range of values under different scenarios and enabling buyers and sellers to negotiate within that range.

Three Core Valuation Approaches

Income Approach

DCF (free cash flow discounted at WACC)

Reflects company-specific earnings economics; exposed to long-term forecast error

Market Approach

GPCM / GTM (multiple comparison)

Intuitive and market-based; influenced by market sentiment

Cost Approach

Marks assets and liabilities to market value

Useful for asset-heavy or restructuring companies

Cross-checking approaches defines a reasonable valuation range → valuation is a decision-making tool

CapabilityEach of the three approaches has different strengths and limits — cross-validation is the right answer.

2.2 The Multiples

The most widely used metric is the EV/EBITDA multiple. If listed peers trade at an average of 8x and the company’s EBITDA is KRW 5 billion, enterprise value is about KRW 40 billion; deducting net debt (borrowings minus cash) of KRW 10 billion leaves KRW 30 billion of equity value for shareholders.

Which multiple to use depends on the company’s earnings stage and industry.

① EV/EBITDA: the default — it strips out differences in capital structure and depreciation policy, so it works across most manufacturing and service businesses.
② EV/EBIT: capex-heavy industries such as manufacturing, logistics, and telecom, where maintenance investment is large and depreciation should be treated as a real cost.
③ PER: a shareholder-level metric on net income, suited to financials (where debt is part of operations) and companies with stable earnings, but fully exposed to capital structure and one-off items.
④ PSR (EV/Sales): loss-making or early-growth companies and platforms whose margins have not yet normalized; it cannot reflect margin differences across industries.
⑤ PBR: financials, real estate, and holding companies, where assets are the core of value.

The choice between forward (next 12 months) and trailing (last 12 months) multiples also matters: a forward multiple favors growth companies, but the business plan’s achievability must be proven to the buyer.

Common Multiples — Which One, When

Metric	Definition	Typical use	Limitation
EV/EBITDA	Enterprise value ÷ EBITDA	Default — most manufacturing and services; compares companies with different capital structures and depreciation policies	Ignores depreciation differences → understates capex burden
EV/EBIT	Enterprise value ÷ operating profit	Capex-heavy manufacturing, logistics, telecom — treats depreciation as a real cost	Sensitive to depreciation method and useful-life choices
PER	Market cap ÷ net income	Financials (banks, insurers, brokers) and stable earners — shareholder-level earnings view	Fully reflects capital structure and one-off items
PSR (EV/Sales)	Market cap (or EV) ÷ revenue	Loss-making or early-growth companies, platforms, biotech — before margins normalize	Cannot reflect margin differences across industries
PBR	Market cap ÷ book equity	Financials, real estate, holding companies — assets are the core of value	Weak reflection of profitability

e.g. industry-average EV/EBITDA 8x × company EBITDA KRW 5B = enterprise value of about KRW 40B − net debt KRW 10B = equity value KRW 30B

CapabilityDon't rely on a single multiple — cross-validate multiple methods to set a reasonable price range.

2.3 Maximizing Enterprise Value

Revenue size does not automatically determine price. To maximize value,

① Divest non-core assets: separate real estate and investments unrelated to the core business so its profitability shows clearly;
② prove recurring revenue: raise the share of subscription and long-term contracts;
③ reduce customer concentration: for example, keep the top five customers below 30% of revenue;
④ retain key people: stock options and retention bonuses to prevent departures;
⑤ financial transparency: clean up owner personal expenses and related-party transactions and bring the books to a standard that withstands due diligence.

Pre-sale conditioning can move the final price by billions of won.

Five Conditioning Levers to Maximize Value

Divest non-core assets

Separate real estate and investments unrelated to the core business

Prove recurring revenue

Raise the share of subscription and long-term contracts

Reduce customer concentration

e.g., top five customers below 30% of revenue

Retain key people

Stock options and retention bonuses

Financial transparency

Clean up owner expenses and related-party transactions

Start conditioning 6–12 months before launch

CaseBegin preparation 6–12 months before kicking off the formal process.

2.4 Designing the Deal Structure

How you sell changes the taxes, the liabilities that transfer, and net proceeds. ① Share transfer (most common; the company continues as is, so all rights and obligations, including contingent liabilities, pass to the buyer); ② asset transfer (only specified assets move; each requires its own transfer procedure and acquisition tax); ③ business transfer / BTA (the business transfers as a whole; specific liabilities can be excluded by contract, but employment relationships transfer as a rule and contracts and licenses must be reassigned); ④ physical or equity spin-off (separate the business unit, then sell; tax deferral if the qualified spin-off requirements are met). The owner’s retirement plan, tax position, and employee treatment must be designed together.

Four Deal-Structure Options

Structure	Transferred object	Features	Key issue
Share transfer	Company equity	Most common; company remains intact	Includes contingent liabilities and rights/obligations
Asset transfer	Individual assets	No automatic employment succession	Asset-by-asset transfer procedure and acquisition tax
Business transfer (BTA)	Entire business unit	Specific liabilities excludable by contract	Employment transfers as a rule; contracts and permits reassigned
Spin-off / split-off	Separated business unit	Sale after separation; tax deferral if qualified	Physical split leaves parent ownership; horizontal split gives shares directly to shareholders

CapabilityIn a physical spin-off the parent holds the new entity’s shares, so sale proceeds accrue to the company; in an equity spin-off the shareholders receive the new shares directly and the proceeds accrue to them.

KPMG by your side

KPMG provides an integrated pre-sale preparation service combining valuation, deal structuring, and tax optimization.

The sell-side advisory team, the Tax team, and — when needed — a vendor due diligence (VDD) team are deployed from the early stage so the owner can sell at the highest value with the most favorable structure.

If a full sale review is needed, please feel free to request an informal consultation at any time.

Contact KPMG

M&A Deal Process and Due Diligence

Thorough due-diligence preparation is itself the source of negotiating leverage.

KPMG Tip

Due diligence is how a buyer verifies whether to buy the company and at what price, and it spans financial, tax, legal, and commercial workstreams.
Buy-side, Vendor (VDD), and Pre-Sale DD differ by who runs them and why. Sellers benefit from starting with Pre-Sale DD.
DD findings sort into four categories: Deal Breaker, Valuation Input, SPA, and PMI.
Clearing latent risks through a pre-sale DD before the buyer’s diligence begins is the source of negotiating leverage.

3.1 Understanding Due Diligence

DD is the buyer's process for confirming “is it safe to buy this company,” precisely verifying financial, tax, legal, and business domains. Whereas a statutory audit (under ISA and the External Audit Act) expresses an opinion on the fairness of historical financial statements, DD follows agreed-upon procedures (AUP) to assess “is this investment safe; what variables exist,” with no opinion expressed and report use limited to the contracting parties.

Four Due-Diligence Areas — Hub & Spoke

Due DiligenceSource of negotiation leverage

FDDFinancials, working capital, and debt

TDDCorporate tax and transfer pricing

LDDContracts, litigation, and CoC

CDDMarket, competition, and customers

CapabilityDD and statutory audits differ in purpose, basis, and intended users.

3.2 Types of Due Diligence

By function: ① FDD (financial — earnings structure, working capital, hidden liabilities); ② TDD (tax — corporate, VAT, transfer pricing); ③ LDD (legal — contracts, litigation, CoC provisions); ④ CDD (commercial — market, competition, customer structure). By who runs it: Buy-side DD (the buyer), Vendor DD/VDD (provided by the seller to prospective investors), Pre-Sale DD (the seller's own check). Sellers benefit from starting with Pre-Sale DD before the formal process.

Diligence by Performing Party

Buy-side DD

Buyer side

Identify potential opportunities and risks early. Efficient analysis is needed under information constraints.

Vendor DD (VDD)

Seller to potential investors

Use external specialists to secure objectivity. Report users are potential investors.

Pre-Sale DD

Seller-only review

Not externally disclosed. Identifies weaknesses and improvement strategies from a seller-friendly perspective.

CaseSector cores: ASP-APP spread for manufacturing; total estimated contract costs for construction/shipbuilding; same-store growth for franchises; new-user quality and revisit rate for platforms.

3.3 The Core of Buy-side FDD: Four Implication Categories

KPMG sorts DD findings into four categories: ① Deal Breaker (major issues that can stop the deal — weak performance, valuation disagreement, key-man uncertainty, regulatory issues); ② Valuation Input (directly affecting price — NWC, net debt, utilization, pricing scheme); ③ SPA Perspective (reflected in the contract — conditions precedent, representations and warranties, disclosure schedule); ④ PMI Perspective (post-deal — profitability uplift, synergies). A single issue often spans multiple categories.

Buy-side FDD: Four Implication Types

Deal Breaker

Major issues that can stop the deal, such as weak performance, valuation gap, key-man uncertainty, or regulation

Valuation Input

Issues that directly affect price, including value chain, margin structure, net working capital, net debt, utilization, and pricing

SPA Input

Issues reflected in SPA terms and closing protections

PMI Input

Issues that shape post-merger integration priorities

CapabilityExample: Yield approaching max capacity triggers expansion capex (Valuation), environmental permits (SPA), and efficiency targets (PMI) simultaneously.

3.4 DD Response Strategy: Why a Sell-side Advisor Matters

When an unexpected issue surfaces in diligence, the result is a price cut or a collapsed deal. The most common findings are ① tax exposure from differences between accounting and tax useful lives, ② VAT business-registration errors, ③ unaddressed findings from past tax audits, ④ internal embezzlement or misuse of funds, ⑤ intercompany cost allocations and related-party transactions off arm’s-length terms, and ⑥ owner personal expenses booked through the company. When the seller finds and fixes these through a pre-sale DD and can show “here is what we did,” the buyer’s grounds for a discount shrink considerably.

Six Issues Most Often Found in Seller Diligence

Useful-life mismatch

Accounting vs tax depreciation → tax exposure

VAT registration

Missing or incorrect business-site registration

Prior tax-audit findings

Findings never remediated

Embezzlement / misuse

Weak internal controls

Related-party dealings

Cost allocations and off-market pricing

Owner personal expenses

Booked through the company → EBITDA adjustment

Fix them first in a pre-sale DD → fewer grounds for a price cut

CapabilityThorough DD readiness is itself negotiating leverage — hence consulting a sell-side advisor is vital to clean any potential risks in advance.

3.5 Price Adjustment and Closing-Adjustment DD

Even after the SPA is signed, confirmatory and completion diligence remain. Price adjustment takes one of two forms. Under a completion-accounts mechanism, the price is trued up after closing for movements in working capital and net debt based on closing-date financials; under a locked-box mechanism, the price is fixed on a reference-date balance sheet and any value leakage after that date is prohibited. In settlement negotiations, one could classify potential adjustment items into four tiers: Tier 1 (basis and amount are clear), Tier 2 (amount uncertain due to data limits), Tier 3 (excluded from adjustment under the SPA), and Tier 4 (basis met but unfavorable to the buyer, i.e., the price would go up). This classification turns the settlement into a structured negotiation.

가격조정항목 4단계 Tier 분류

Tier	정의	비고
Tier 1	조정 사유 충족 + 기준재무제표 반영 명확	협상 시 양측 합의 가능성 높음
Tier 2	자료 제약으로 금액적 불확실성 존재	매수·매도 간 이견 발생 가능
Tier 3	SPA상 조정 대상에서 제외	협상 외 항목
Tier 4	조정 사유 충족, 단 매수자에 불리(대금 상향 방향)	순자산 증가 → 매수자 측 거부 가능

CapabilityThe tier classification is the starting point of a structured settlement, not haggling. Under either mechanism, how “target net working capital” is defined drives the settlement amount.

KPMG by your side

KPMG's Transaction Services team holds top-tier Korean track records across buy-side and sell-side due diligence. Built on sector-by-sector DD-point frameworks and dozens of actual case libraries, we support the entire deal arc from preliminary DD through closing-adjustment DD.

Our sell-side advisory team is also staffed with seasoned DD professionals who, viewing the deal through a diligence lens, pre-emptively surface and remediate potential Deal Breakers to achieve the best enterprise value.

Whether you are a buyer or seller, if you want to know “what to prepare,” KPMG will build the checklist with you.

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Succession and Owner Exit

Exit should be decided proactively while enterprise value is high.

KPMG Tip

An exit is best decided proactively while enterprise value is high and the owner's judgment is intact.
Use Earn-out to bridge price-expectation gaps and Rollover to express commitment to future growth.
PMI is structured in two stages — Day 1 (operational readiness) and Day 100 (strategy realization) — and inadequate Day 1 preparation translates directly into an operational vacuum right after closing.
Tax issues such as the real-estate-heavy entity test can swing outcomes by hundreds of millions to billions of KRW — early structuring is decisive.

4.1 The Moment an Owner Decides to Exit

Selling a company is as much an emotional decision as a financial one, and many owners deliberate until the optimal window has passed. Triggers vary: ① children unwilling or unready to succeed, ② the owner’s health or retirement, ③ inheritance and gift taxes making family succession impractical, ④ a fair-priced exit during a strong industry cycle, and ⑤ the need for a large corporate’s or professional investor’s resources to reach the next stage of growth. What matters more than the trigger is when, and in what structure, the exit is executed.

Five Triggers for Owner Exit

No succession path

Children lack willingness or capability

Health or retirement

Owner life-cycle considerations

Tax burden

Inheritance/gift tax pressure and unavailable succession relief

Strong industry conditions

Opportunity to exit at an attractive price

Growth resources needed

Need for a strategic buyer or professional investor

The best exit often comes when enterprise value is high and the owner can still make clear decisions.

PerspectiveThe best exit is one decided proactively while enterprise value is high and the owner's judgment is intact.

4.2 Succession or Sale: What Decides It

The later succession planning starts, the fewer the options. If inheritance begins without preparation, rising share values and unmet deduction requirements push up the tax bill, scattered shareholdings slow family decisions, a shortage of tax funding forces fire sales of core assets or excessive dividends and borrowing, and an ill-defined successor role unsettles key employees and customers. Family succession deserves first consideration when there is a clear successor whose capability can be built step by step, the family agrees on long-term ownership, and there is a workable plan for the tax and its funding. Conversely, when no suitable successor exists, shareholders’ goals diverge or liquidity needs are large, growth requires outside capital and capability, or a deal opportunity can realize enterprise value, a sale or investment comes first. Succession and sale are not either/or: they form a spectrum from full succession through staged transfer, hybrid structures, minority investment and divisional sales to a strategic sale, and every scenario should be compared on the same yardsticks — enterprise value, after-tax cash flow, governance and execution risk. The tax regime, tax funding and the gift-versus-inheritance mix that follow a succession decision are covered in the next item.

Succession First vs Sale/Investment First — Criteria and the Execution Spectrum

Decision criteria

Consider family succession first

Is there a successor and a plan?

01A clear successor with a strong will to take over
02Capability can be built step by step through key roles and co-management
03Family agrees on long-term ownership, dividend and investment principles
04A workable plan for expected gift/inheritance tax and its funding (dividends, installment payment, borrowing)

Consider a sale or investment first

Is outside capital or a deal the answer?

01No suitable successor, or succession intent is uncertain
02Shareholders’ goals diverge or liquidity needs are large
03Growth requires outside capital and technology or market capability
04A deal opportunity exists to realize enterprise value (market demand, expected value)

Execution scenarios — from full succession to strategic sale

Full family succession

Transfer management and equity to the successor; succession tax regime, tax funding and organizational stability are key

Staged transfer of control

A co-management period for founder and successor to prove capability and market trust

Hybrid structure

Successor runs the business, family keeps part of the equity, outside investor comes in

Minority investment

Keep control while securing growth capital and outside expertise

Sale of a division or non-core assets

Focus on the core business; manage the succession burden and tax funding at once

Strategic sale

Transfer control to an investor with synergies and realize enterprise value

Common yardsticks — enterprise value and after-tax cash flow · governance · fairness among family · key people · timeline and execution risk

CapabilityThe comparison starts by putting four lenses in one table — family (successor intent, consensus, shareholder liquidity), company (growth, capital needs, organizational capability), deal (enterprise value, investor type, scope of sale, retained control) and after-tax outcome (tax burden, cash flow, tax funding, post-deal asset structure).

4.3 The Backbone of Succession Tax: Inheritance Deduction, Gift-Tax Relief and Tax Funding

Two regimes decide the tax burden once succession is chosen. ① The family-business inheritance deduction: at inheritance, family-business assets are deducted from the inheritance tax base, capped at KRW 30bn, 40bn or 60bn when the predecessor ran the business for 10, 20 or 30+ years (as of Sep 2026). It covers SMEs and mid-sized companies with three-year average revenue under KRW 500bn; the predecessor must have managed the business for 10+ years and held 40% (listed: 20%) as largest shareholder for 10 years, the heir must have worked in the business for 2+ years and become an officer by the filing deadline and CEO within 2 years, and industry, headcount, assets and shareholding must be maintained for 5 years afterwards. ② The gift-tax special provisions for succession: when a parent aged 60+ who has run the company for 10+ years gifts its shares during life, KRW 1bn is exempt and the rest is taxed at 10% up to KRW 12bn and 20% above (cap KRW 60bn); the recipient must become CEO within 3 years and observe 5-year post-transfer conditions, and the gift tax can be paid in installments over up to 15 years. Shares gifted under the relief are aggregated at inheritance but can then flow into the inheritance deduction if the tests are met. Under both regimes, non-business assets — real estate, loans receivable, excess cash, financial instruments — fall outside the deduction, so restructuring the asset base before succession determines the real benefit, and tax funding combines installment payment, dividends, insurance, borrowing and partial share sales to match the tax bill and cash flow. Gift and inheritance are mixed by asset type: shares and businesses expected to appreciate are gifted early at today’s value, control-critical shares are transferred in stages as the successor proves out, assets that generate dividends or rent are tied to the funding plan, and non-business or liquid assets outside the deduction are separated from the business shares and timed on their own. Requirements and caps change often, so the actual design must be re-checked against the law in force at the time of succession.

Two Pillars of Succession Tax — Inheritance Deduction vs Gift-Tax Special Provisions (as of Sep 2026)

Item	Inheritance deduction (on death)	Gift-tax special provisions (lifetime gift)
When	At inheritance — family-business assets deducted from the inheritance tax base	At a lifetime gift — low flat rates on corporate shares (sole proprietors excluded)
Eligible company	SME, or mid-sized company with 3-year average revenue under KRW 500bn	Same (corporate shares only)
Transferor	10+ years of continuous management · largest shareholder with 40% (listed: 20%) held 10+ years incl. related parties · CEO for a substantial part of the period	Aged 60+ · 10+ years of continuous management · same largest-shareholder test
Transferee	Aged 18+ · 2+ years in the business before inheritance · officer by the filing deadline, CEO within 2 years	Aged 18+ · in the business by the filing deadline · CEO within 3 years of the gift
Benefit · cap	Deduction capped at KRW 30bn / 40bn / 60bn for 10+ / 20+ / 30+ years of operation	KRW 1bn exempt, then 10% up to KRW 12bn and 20% above · cap up to KRW 60bn
Post-transfer conditions	5 years — keep industry, headcount, business assets and shareholding	5 years — keep industry, shareholding and CEO role (aggregated at inheritance; deduction may then apply)
Tax funding	Installment payment up to 20 years (incl. 10-year grace + 10)	Installment payment up to 15 years

Both regimes: real estate, loans receivable, excess cash and financial instruments (non-business assets are excluded) → pre-succession asset restructuring drives the real deduction

Requirements and caps as of Sep 2026 — re-check against the law at the time of succession

CaseExample: 25 years of operation and KRW 50bn of family-business assets → the cap is KRW 40bn (as of Sep 2026), leaving KRW 10bn taxable. Once operation passes 30 years the cap rises to KRW 60bn and the whole amount fits, so timing and eligibility decide the tax bill. The specific application must be reviewed against the law and facts at the time.

4.4 Earn-out and Rollover: Two Tools for Price Gaps and Future Participation

The seller believes the business will keep growing; the buyer is reluctant to pay a premium for an unproven future. Two tools address that gap. ① Earn-out: on top of the fixed payment at closing, additional consideration is paid if agreed KPIs are met over a set period (typically 1–3 years). What matters is the KPI definition (revenue or EBITDA), consistent accounting, and how buyer interference is treated; the owner’s role during the earn-out period should be planned in advance. Vague KPIs are the seed of disputes. ② Rollover: the seller keeps a minority stake (typically 10–30%) at the sale and takes a “second bite of the apple” on post-deal value creation. If the PE buyer exits successfully in three to five years, the retained stake delivers a second payout, and to the buyer it signals confidence in the company’s future. The flip side: a retained stake is illiquid, carries limited control, and can be impaired if the buyer’s management falters — so tag-along and drag-along rights, the scope of management participation, dividends, and exit timing and method must be set out clearly in the SHA. The two point in opposite directions. An earn-out is the buyer paying more cash conditionally, so the seller’s downside is floored by the fixed payment; a rollover is the seller staying in with equity, exposed both ways. That is why the two are often combined — fixed payment + earn-out + a 10–30% retained stake.

Earn-out vs Rollover — Two Tools for Price Gaps and Future Participation

Item	Earn-out	Rollover
Problem it solves	Buyer and seller disagree on today’s value	The seller wants a share of post-deal growth
Structure	Fixed payment at closing + additional payment if KPIs are met over an agreed period	The seller keeps a minority stake (typically 10–30%) instead of selling it
What the seller gets	Conditional cash — more if performance lands, only the fixed amount if not	Retained equity — a second payout on resale or IPO (second bite)
Horizon	Typically 1–3 years	Typically 3–5 years (the PE exit cycle)
Seller’s risk	Missed KPIs, definition disputes, buyer interference → no earn-out. Downside is floored by the fixed payment	Illiquid minority stake with limited control; value impaired if the buyer’s management falters. Exposed both ways
Key design points	KPI definition (revenue vs EBITDA), consistent accounting, treatment of buyer interference, the owner’s role during the period	Tag-along and drag-along rights, scope of management participation, dividend policy, exit timing and method
Governing document	SPA (consideration clauses)	SHA (shareholders’ agreement)
Fits when	The seller is confident in the plan but the buyer cannot verify it	The owner stays on and believes in the next leg of growth; the buyer wants to keep using the owner’s network

They point in opposite directions — an earn-out is the buyer paying more, conditionally; a rollover is the seller staying in with equity

Often combined — fixed payment + earn-out + 10–30% retained stake

CapabilityKPIs decide an earn-out; the SHA decides a rollover. A revenue KPI can be hit by sacrificing margin, while an EBITDA KPI invites accounting-policy disputes — so the definition and calculation method must be pinned down numerically in the SPA.

4.5 After Closing: Integration (PMI) and Key-Man Continuity

Signing is not the end. Two things decide what happens after closing: integrating the organization and whether the owner stays on. ① Employment succession and integration (PMI): for owners, employee treatment matters as much as price. KPMG structures PMI into Day 1 (operating phase) and Day 100 (strategic phase). Day 1 prepares every function — sales, finance, HR, IT, admin, logistics, legal — to operate normally between SPA signing and closing; Day 100 covers function-level workshops, mid-to-long-term operating and growth models, concrete synergy plans, and a regular Steering Committee reporting cadence. ② Key-man issues and continued management: the most sensitive issue in SMB M&A is whether the owner stays on. The owner is often the key man, so buyers typically ask for 1–3 years of continued management, during which customer relationships are handed over, key employees stabilize, and operations transfer to the new management. The owner must balance “I want to rest right away” against “better terms require a commitment to stay,” with period, role, compensation and non-compete provisions clearly set out in the SPA. Both connect directly to the earn-out and rollover above — if Day 1 readiness is weak or the owner’s handover slips, the cost comes back to the seller through earn-out targets and the value of any retained stake.

① Integration — PMI Roadmap

PMI Roadmap

Day 1 (Operations) → Day 100 (Strategy)

Day 1Prepare normal operations across sales, finance, HR, IT, general affairs, logistics, and legal
Day 100Run function workshops and build the medium-to-long-term operating and growth model
AfterwardRegular steering committee reporting and accelerated synergy/R&D collaboration

② Key-Man Continuity

Balancing Continued Key-Man Management

Seller desire

Rest immediately after the sale

Common ground

Typically participate in management for 1-3 years

Transfer customers, employees, and systems

Buyer desire

Ensure business continuity

SPA clauses — management participation period, role scope, compensation, and non-compete

CapabilityA management-continuation structure that fits the owner’s life plan is the final piece of a successful deal. The Day 1 checklist and the owner’s handover plan should be settled together before the SPA is signed.

4.6 Tax Optimization of Sale Proceeds

The owner’s net proceeds are the sale price minus tax. When an individual major shareholder sells unlisted shares, the rate is 22% on the first KRW 300 million of taxable gain and 27.5% above that (including local income tax). If the company qualifies as a real-estate-heavy corporation, however, the shares are treated as “other assets” and taxed at progressive rates, reaching 49.5% on gains above KRW 1 billion. Structural responses include ① selling real estate first to bring the ratio below 50%, ② switching to a business transfer, ③ separating real estate from operations via a physical or equity spin-off, and ④ staged sales (with limited effect, since a controlling shareholder is tested on cumulative transfers over three years). Cash raised through borrowing or capital increases within one year before the transfer is excluded from total assets, so short-term ratio management is not recognized.

Tax Optimization

Private Shareholder Capital-Gains Tax Rate Comparison for Unlisted Shares

Ordinary corporationAbout 22% up to KRW 300M / about 27.5% on the excess
Real-estate-heavy corporationBasic tax rate applies → up to 49.5% above KRW 1B
Structural responsesPre-sale disposal · business transfer · spin-off · staged sale (3-year cumulative test)

CaseShort-term, artificial ratio management does not work. Structure the deal with tax specialists from the earliest stage.

KPMG by your side

KPMG covers the full M&A lifecycle from sell-side advisory through carve-outs and PMI — designing not just deal completion but Day 1 and post-Day 100 operations together with the client.

Tax optimization is engaged from the very early structuring stage — pre-empting issues such as the real-estate-heavy entity test and industry-specific taxation.

If you want to think through the owner's whole-life design — post-exit asset management, foundation establishment, family-wealth diversification — we also offer Family Office services.

Contact KPMG

Understanding Financing

Raising capital means selling equity — understand the arithmetic of dilution and terms first.

KPMG Tip

Raising capital means selling part of the equity. Founder ownership shrinks each round, but if enterprise value grows the stake is worth more — the question is not dilution itself but at what value you dilute.
Each stage (seed → Series A, B, C → D/pre-IPO) changes not only valuation, ticket size and investor type, but what investors test: team → product-market fit → unit economics → profitability.
Startup valuation combines back-solving, the VC method, Berkus and scorecard methods instead of DCF, and a high valuation is not always good — miss the next round and a down round and refixing follow.
Every clause in an RCPS term sheet — redemption, drag-along, refixing, warranties — has a founder checkpoint. Structures that put the redemption obligation on the CEO personally should be avoided.

5.1 Fundamentals: The Arithmetic of Equity and Dilution

Raising capital means selling part of the company’s equity to investors. Growth can be funded three ways — internal cash flow, debt (loans, convertible bonds) or equity (new shares) — and equity carries no interest or repayment burden, but the price is a share of ownership and decision-making. The core arithmetic is pre-money and post-money. Pre-money value plus the investment equals post-money, and the investor’s stake is the investment divided by post-money. Raise KRW 1bn at a KRW 4bn pre-money and the post-money is KRW 5bn: the investor holds 20%, the founder 80%. Founder ownership falls with each round, but if enterprise value grows the stake is worth more — 80% × KRW 5bn = KRW 4bn becomes 45% × KRW 80bn = KRW 36bn after a Series B. Counting investors and an employee option pool (typically around 10%), founders often drop below a majority around the B round, so control, board composition and reserved matters must be protected by contract (the SHA), not by percentage. The question, then, is not how much you dilute but at what value and on what terms.

Dilution by Round — A Smaller Slice of a Bigger Pie

Round	Pre-money	Investment	Post-money	New shares	Founder stake	Founder stake value
Seed	KRW 4bn	KRW 1bn	KRW 5bn	20%	80%	KRW 4bn
Series A	KRW 15bn	KRW 5bn	KRW 20bn	25%	60%	KRW 12bn
Series B	KRW 60bn	KRW 20bn	KRW 80bn	25%	45%	KRW 36bn

Investor stake = investment ÷ post-money · founder stake value = founder % × post-money (illustrative, option pool excluded)

The test — not how much you dilute, but at what value and on what terms

MarketDilution is not a defect; it is the cost of growth. The problem is diluting cheaply in a hurry, or giving away contractual rights heavier than the percentage sold.

5.2 Characteristics by Investment Stage

A startup moves from start-up → death valley (cash runs out before a proven revenue model) → scale-up → exit preparation, and funding rounds sit on top of that life cycle. Valuation, ticket size and investor type shift from Seed/Pre-A (valuation under KRW 5bn, tickets of KRW 0.5–2bn; angels, government programs, TIPS) to Series A/B (KRW 10–100bn, tickets of KRW 2–15bn, VC-led), Series C (KRW 100–500bn, tickets of KRW 20–100bn; large VCs, PE, CVCs) and Series D/pre-IPO (KRW 1tn+, global PE and strategic investors). What matters more is that the test changes at each stage: seed investors look at the team and the problem, Series A/B at product-market fit, retention and unit economics, Series C at profitability, market dominance and overseas expansion, and pre-IPO investors at listing requirements and governance. Build the IR around what this stage’s investor is testing.

Valuation, Ticket Size and Investors by Stage — and What Investors Test

Stage	Valuation	Ticket	Main investors	What they test
Seed / Pre-A	≤ KRW 5bn	KRW 0.5–2bn	Angels · government · TIPS · accelerators	Team, problem definition, prototype
Series A / B	KRW 10–100bn	KRW 2–15bn	VCs	PMF, retention, unit economics
Series C	KRW 100–500bn	KRW 20–100bn	Large VCs · PE · CVCs	Profitability, market dominance, overseas expansion
Series D / Pre-IPO	≥ KRW 1tn	Pre-IPO round	Global PE · strategics	Listing requirements, governance, earnings visibility

TIPS — operator lead investment + government R&D match (2026: up to KRW 800M general track · KRW 1.5B deep-tech track)

CaseTIPS matches an operator’s (accelerator or VC) lead investment with government R&D funding — as of 2026, up to KRW 800 million on the general track and KRW 1.5 billion on the deep-tech track.

5.3 Startup Valuation: Methods and the High-Valuation Trap

Traditional M&A prices proven results (EBITDA) and transfers control; fundraising shares part of the equity for a bigger future, and the price is a bet on future market dominance. With no cash flow to discount, early-stage companies use ① back-solving from the round (pre/post-money from the target amount and stake), ② the VC method (exit value discounted at a target return), ③ the Berkus method (capped amounts across technology, team, prototype, strategic relationships and revenue) and ④ the scorecard method (weighted factors against comparables), converging on listed-peer and recent-round multiples (ARR multiples and the like) in later rounds. A high valuation is not always good. Price this round high and the next must be higher still; if results lag, the next round becomes a down round, refixing and anti-dilution clauses fire, and the founder’s stake shrinks all at once — and employee options lose their appeal. The right valuation is one the company can grow past by the next round, and the investor mix and terms matter as much as the number.

Startup Valuation

Four methods for early-stage companies where DCF fails — and the trap

Back-solvingPre/post-money from the target amount and stake
VC MethodExit value discounted at a target return
Berkus MethodCapped amounts across technology, team, prototype, relationships, revenue
ScorecardWeighted factors against comparable companies
The high-valuation trapMiss the next round → down round → refixing and anti-dilution fire

CapabilityExample: a KRW 1bn target at 10% → post-money KRW 10bn, pre-money KRW 9bn. Take the same KRW 1bn at 20% and post-money is KRW 5bn — half the valuation, but half the hurdle for the next round as well.

5.4 Market Sizing and the IR Deck

A startup IR starts with market size: ① TAM (total addressable market — the entire market the business belongs to), ② SAM (serviceable available market — what the product can actually reach) and ③ SOM (serviceable obtainable market — what can be won in the early stage). SOM matters most because it underpins the revenue forecast, and investors trust a bottom-up SOM built from customers × average spend × conversion far more than a top-down “just 1% of the market.” A deck usually runs about ten slides: ① problem ② solution/product ③ market (TAM·SAM·SOM) ④ business model ⑤ traction (revenue, users, retention) ⑥ competition and differentiation ⑦ growth strategy ⑧ team ⑨ financial projections ⑩ the ask (amount, stake, use of funds). Lead with the conclusion: the investment highlights belong on page one. Investors see dozens of decks a week and decide on a second meeting within the first two slides.

Market Size Analysis — TAM / SAM / SOM

SOM

Initially obtainable

TAM

SAM

TAMEntire business domain

Total Addressable Market — total market size of the business domain; theoretical maximum.

SAMActual target market

Serviceable Available Market — the effective market that the product/service can actually reach.

SOMInitially obtainable market

Serviceable Obtainable Market — market share obtainable in the early stage; basis for revenue estimates.

The standard 10-slide deck — lead with the conclusion; the first two slides decide the next meeting

Problem

Who, what, why unsolved

Solution / product

What, and how it differs

Market

TAM · SAM · SOM (bottom-up)

Business model

Who pays what, and why

Traction

Revenue · users · retention

Competition

Why you win vs alternatives

Growth strategy

The next 12–24 months

Team

Why this team

Financials

3–5-year P&L · burn

The ask

Amount · stake · use of funds

CapabilityInvestors hear dozens of pitches in a single sitting — the first page determines destiny.

5.5 Key Term-Sheet Clauses and Founder Checkpoints

Most Korean startup rounds use redeemable convertible preferred shares (RCPS). The investor comes in with preferred stock, converts to common to capture the upside, and protects the downside with redemption and similar rights. The key clauses: ① redemption (put): the investor’s right to have the company buy back its shares — exercisable only out of distributable profits under the Commercial Act, but if the obligation sits with the CEO personally it works like a personal guarantee, so it must be limited to the company. ② Drag-along: the investor’s right to force other shareholders to sell alongside — set a trigger date (a period after investment), a floor price and the investor-approval threshold. ③ Tag-along: the investor’s right to sell on the same terms when the majority holder sells. ④ Refixing: lowering the conversion price if results or the IPO price fall short — cap it with a floor (say 70% of the original conversion price) and narrow triggers. ⑤ Pre-emptive and consent rights: the list of matters needing investor consent (new shares, asset disposals, borrowing) must be balanced against management autonomy. ⑥ Qualified IPO: an obligation to list above a market-cap threshold — check that the deadline and size are realistic. ⑦ Warranties and founder undertakings: the founder’s service and non-compete obligations and the consequences of breach. The balance of each clause decides the deal and the founder’s next five years.

Seven RCPS Clauses — What They Mean and What Founders Check

Clause	What it is	Founder checkpoint
Redemption (put)	Investor requires the company to buy back shares	Obligation limited to the company — a CEO personal obligation works like a guarantee
Drag-along	Investor forces other holders to sell alongside	Trigger date · floor price · investor-approval threshold
Tag-along	Investor sells on the same terms when the majority sells	Same terms guaranteed when founders sell
Refixing	Conversion price lowered if results/IPO price fall short	Floor (e.g., 70% of original) · narrow triggers
Pre-emptive · consent rights	Consent needed for new shares, disposals, borrowing	Balance with autonomy — keep the consent list short
Qualified IPO	Obligation to list above a market-cap threshold	Realistic deadline and size; consequences of a miss (redemption trigger)
Warranties · founder undertakings	Company warranties, service and non-compete duties	Scope and duration; consequences of breach

Negotiating priority — redemption obligor · drag triggers · refixing floor · consent scope

CapabilityNegotiate in this order: ① who bears the redemption obligation (the company only), ② drag-along triggers, ③ the refixing floor, ④ the scope of consent rights. These four shape the founder’s future more than a small difference in valuation.

5.6 The Fundraising Process and What Makes It Work

A raise usually takes three to six months in five steps. ① Preparation (2–4 weeks): build the deck, financial model and data room, and set the target amount and valuation range. ② Investor outreach (1–2 months): build a tapping list matched to stage, sector and ticket size (typically 30–50 investors), meet them in sequence, and open detailed materials to those interested. ③ Term sheet (2–4 weeks): agree valuation, amount and key terms with a lead investor. ④ Due diligence and contracts (1–2 months): financial, legal and technical diligence, then the investment and shareholders’ agreements. ⑤ Closing and after: share issuance and payment, board composition, reporting cadence. Successful raises share open communication with the advisor, the flexibility to pivot as the market dictates, and the judgment to widen the target beyond financial investors to strategic investors who understand the technology and the market. One retail-tech startup pivoted to smart cabinets after judging its initial market not yet open, and then closed its round. Failed raises share a business model never narrowed to one, clinging to it after the market’s limits showed, poor communication inside the founding team — and starting with three months of cash left.

The Five-Step Raise — Typically 3–6 Months

Step 1

Prepare

Deck · model · data room · target valuation

2–4 wks

Step 2

Outreach

Tapping list of 30–50 · sequential meetings

1–2 mo

Step 3

Term sheet

Valuation, amount, key terms with the lead

2–4 wks

Step 4

Diligence · contracts

Financial, legal, tech DD → SPA · SHA

1–2 mo

Step 5

Closing · after

Issuance · board · reporting

2 wks

Start with 9–12 months of cash — with 3 months left, the investor sets the terms

What Successful and Failed Raises Have in Common

Success

Teams that closed the round

01Open communication with the advisor
02Pivoting the business model to the market
03Widening the target from FIs to strategic investors

Failure

Teams that did not

01Business model never narrowed to one
02Clinging to the model after the market’s limits showed
03Poor communication inside the founding team

Keys — early communication · curated investment highlights · FI and SI network

CapabilityStart a round with nine to twelve months of cash in hand. Negotiate with three months left and the investor sets the terms.

KPMG by your side

KPMG advises on startup financing from Seed through Pre-IPO, with broad VC/PE/CVC networks.

From the IR deck and financial model through valuation support, the tapping list, term-sheet and contract negotiation and closing, we work alongside you and screen founder-side risks clause by clause.

By combining our FI and SI networks with “IR that closes deals” know-how, we materially raise the probability of a successful startup financing.

Contact KPMG

Characteristics of Real-Estate Transactions

Asset value equals enterprise value — tax and permits are decisive variables.

KPMG Tip

Whether you trade the asset itself or the shares of the company that owns it changes acquisition tax, capital-gains tax, VAT and what transfers with it. Choosing the structure is the first decision.
Commercial real-estate value is NOI ÷ cap rate. A KRW 100M NOI improvement adds KRW 2bn of value at a 5% cap rate, and a 0.5-point cap-rate move alone shifts value by around 10%.
The real-estate-heavy corporation test (50% of assets, 80% for designated industries) can lift the share-sale tax rate to 49.5%, and the 2026 expansion of acquisition-tax surcharges has reshaped how golf courses trade.
For infrastructure and renewable assets, long-dated stable cash flow is the point: the PF structure, DSCR, long-term offtake (PPAs, fixed-price contracts) and grid connection decide value.

6.1 What Makes Real-Estate M&A Different

Real-estate M&A differs from an ordinary company sale in three ways: ① asset value is company value (the property’s market value is most of it), ② the tax structure is complex, and ③ permits and regulation (zoning changes, building and environmental rules) bear directly on value. The first decision is the structure. In an asset deal — trading the property itself — the buyer pays acquisition tax (standard 4.6% for commercial property: 4% acquisition tax + 0.4% local education tax + 0.2% rural development tax) and VAT on the building, leases and permits are reassigned one by one, and the previous owner’s contingent liabilities stay behind. In a share deal — trading the shares of the company that owns the property — there is no acquisition tax, but a buyer who crosses 50% becomes a controlling shareholder and pays deemed acquisition tax (2.2%) on the company’s property book value × stake; the seller’s share-sale tax follows progressive “other asset” rates if the company is real-estate-heavy; and because the company transfers intact, leases and permits are preserved but contingent liabilities come along too. A single asset inside a company with other debts or history usually favors an asset deal; multiple assets, permits worth preserving and a clean company usually favor a share deal. (Rates as of Sep 2026)

Asset Deal vs Share Deal — What Changes (as of Sep 2026)

Item	Asset deal (the property)	Share deal (the property-owning company)
Buyer’s acquisition tax	Standard 4.6% (4% + 0.4% local education + 0.2% rural development)	None — but crossing 50% triggers deemed acquisition tax of 2.2% on property book value × stake
VAT	10% on the building (unless a comprehensive business transfer)	None
Seller’s tax	Company: corporate tax on the gain · individual: capital-gains tax	Share-sale tax — progressive “other asset” rates (up to 49.5%) if real-estate-heavy
What transfers	The asset only — leases and permits reassigned individually	The whole company — leases and permits preserved, contingent liabilities included
Diligence focus	Title · physical condition · leases · permits	All of the above + company financials, tax and litigation history
Fits when	Single asset; company carries other debts or history	Multiple assets; permits worth preserving; clean company

Structure is the first decision — tax and legal review before price negotiation

CapabilityIn an asset deal, VAT on the building can be avoided if the transfer qualifies as a comprehensive transfer of the business — a classic point for early tax review in structuring.

6.2 Commercial Real-Estate Value-Add Strategy

Value-add means improving an asset’s income before sale to earn a higher price, combining physical upgrades (remodeling, lobby, energy efficiency) with operational ones (filling vacancy, normalizing rents, re-tenanting around an anchor). Value is NOI ÷ cap rate: KRW 1bn of NOI at a 5% cap rate is KRW 20bn, and lifting NOI to KRW 1.1bn makes it KRW 22bn — a KRW 100M improvement becomes KRW 2bn of value. Remember that the cap rate is a variable you do not control. The same KRW 1bn of NOI is worth KRW 22.2bn at 4.5% and KRW 18.2bn at 5.5%, so a half-point move shifts value by around 10%. Cap rates tend to rise with interest rates, so a market move can offset NOI gains from value-add. Timing a sale therefore means reading the NOI improvement schedule against the rate and cap-rate cycle.

KRW 100M NOI Improvement = KRW 2B Increase in Asset Value

Before improvement

KRW 20B

KRW 1B NOI / 5% cap rate

After improvement

KRW 22B

KRW 1.1B NOI / 5% cap rate

Physical improvement

Remodeling, lobby, and energy efficiency

Operational improvement

Fill vacancy, normalize rent, and tenant-mix renewal

Cap-rate sensitivity — asset value at KRW 1bn NOI

Cap rate	4.5%	5.0%	5.5%
NOI KRW 1.0bn	KRW 22.2bn	KRW 20.0bn	KRW 18.2bn
NOI KRW 1.1bn	KRW 24.4bn	KRW 22.0bn	KRW 20.0bn

A 0.5-point move ≈ ±10% of value · read NOI gains against the cap-rate cycle

CasePlan the asset life cycle as acquire → reposition → stabilize → exit. The stabilized numbers — vacancy filled, rents normalized — are what the sale price rests on.

6.3 Tax Issues for Real-Estate-Heavy Entities

Two test criteria: ① general (real estate is ≥50% of total assets and a deemed controlling shareholder transfers ≥50% of issued shares); ② specific industries (for golf courses, ski resorts, resort condos, etc., even a single share transfer triggers the test if real estate is ≥80%). Subsidiary real estate is included indirectly, valued at the higher of book value or standard market value. Cash raised by borrowing or new equity within one year of transfer is excluded from total assets (to prevent artificial ratio manipulation).

Real-Estate-Heavy Entity Test

Requirement	Real-estate ratio	Transfer condition	Result
General test	At least 50% of assets	Controlling shareholder transfers at least 50%	Basic tax rate applies, up to 49.5%
Specific sectors such as golf courses, ski resorts, and condos	At least 80%	Applies even if only one share is transferred	Basic tax rate applies

⚠ Cash increased through borrowing or capital issuance within 1 year of transfer is excluded from total assets (prevents artificial ratio manipulation).

CaseExample: total assets KRW 30.0B, real estate KRW 14.5B (land 10.0, buildings 3.4, look-through subsidiary property 1.1). Excluding KRW 3.0B of cash borrowed within a year of the transfer, the ratio is 14.5/27.0 = 53.7% — caught; if the borrowing predates one year, 14.5/30.0 = 48.3% — not caught. The timing of one loan can swing the tax bill by billions of won.

6.4 Golf Courses and Resorts: The Three-Tier Regime and the 2026 Acquisition-Tax Change

Golf courses and resorts are far more complex than ordinary commercial property, starting with tax. Since 2023 courses fall into three tiers — membership, non-membership and public-type. Membership and non-membership courses pay individual consumption tax of KRW 12,000 per visitor, about KRW 21,120 with education, rural-development and value-added taxes on top; only public-type courses that keep green fees under the government ceiling are exempt. Holding taxes are also heavier on non-membership courses, and in 2025 eleven of them converted to public-type. The biggest change is the 2026 revision of the Local Tax Act: acquiring an existing membership course now attracts the same acquisition-tax surcharge as building a new one (4% → 12%), and the membership deposits the buyer assumes are added to the tax base, so the buyer’s tax can exceed half the price — and demand for membership courses has collapsed. On top of that sit the designated-industry test on share sales (80% real estate → even one share sold is taxed as an “other asset” at progressive rates), membership-right values (supply, demand, location), operating rights (service know-how, brand), environmental rules (pesticides, water, ecosystems) and permit conditions. Structures — conversion to public-type (funding the deposit refunds is the crux) before sale, selling the land first, splitting off the course company, or an asset sale — must be compared on after-tax proceeds. (As of Sep 2026)

Golf · Resort M&A (as of Sep 2026)

Three tiers · excise · holding tax · acquisition tax — the buyer’s tax bill sets the price

TiersMembership · non-membership · public-type (since 2023)
Excise taxAbout KRW 21,120 per visitor for membership/non-membership · public-type exempt (fee ceiling)
Holding taxNon-membership > public-type — 11 conversions in 2025
Acquisition tax (2026)Surcharge now applies to existing membership courses: 4% → 12% · assumed deposits added to the base
Share sales80%+ real estate → even one share taxed as an “other asset”
StructuresConvert to public-type then sell · land first · spin-off · asset sale

CaseSelling a membership course starts with who pays how much acquisition tax. Because the buyer’s tax bill squeezes the price, the courses that trade are the ones that have converted to public-type and settled their deposits first.

6.5 Infrastructure and Project Finance: Who Funds It and What Repays It

Infrastructure means social overhead capital — power plants, roads, ports, airports, railways — and the scope now extends to solar, wind, waste, water and sewerage, and data centers. It is funded through project finance. A special-purpose company is set up for the project alone; sponsors put in equity (typically 20–30% of project cost) and lenders provide debt (70–80%); an EPC contractor builds, an O&M operator runs it, and revenue — power, tolls, rent — is locked in by long-term offtake contracts or regulated tariffs. Because the debt is repaid from the project’s cash flow rather than the sponsor’s credit, lenders require a debt-service coverage ratio (annual cash flow over principal and interest) of typically 1.2–1.3x or more, with maturities of 15–20 years. Risk changes by phase: before completion it is construction delay, cost overrun and permits; after completion it is demand, tariff, interest rates and operating performance — so pre-completion equity and a stabilized operating asset carry different prices and different buyers. Because infrastructure assets are less sensitive to the business cycle and generate long-dated, stable cash flow, pension funds and insurers favor them, investing either directly in a project or indirectly through infrastructure funds and listed infrastructure companies.

Project Finance Structure — Money Flows and the Source of Repayment

Sponsors + lenders

20–30% equity + 70–80% debt — secured on project cash flow, not sponsor credit

SPC (project company)

A special-purpose company holding the assets, contracts and debt

EPC · O&M

Construction and operations outsourced by contract — completion and performance guarantees

Offtaker · tariff

Revenue fixed by long-term offtake (PPA, tolls, rent) or regulated tariffs

Lenders require DSCR typically ≥ 1.2–1.3x · maturities 15–20 years · pre-completion (construction risk) and post-completion (operating risk) carry different prices and buyers

How to invest — direct equity in a project · indirect via infrastructure funds and listed infrastructure

MarketInfrastructure investing splits into direct investment (project equity) and indirect investment (infrastructure funds and listed infrastructure firms).

6.6 ESG and Renewable Assets: The Opportunity and the Diligence Points

ESG has become a condition of access to capital. With the EU’s mandatory sustainability disclosure and institutional investors such as Korea’s National Pension Service expanding ESG investment, environmental performance feeds into the cost of capital and deal prices, and the 400-plus RE100 members — including Samsung Electronics, Hyundai Motor, SK hynix and LG Energy Solution — pushing renewable-electricity requirements down to suppliers is driving demand for renewable generation assets and power purchase agreements (PPAs). Data-center power demand points the same way. Solar and wind plants have therefore become actively traded assets in their own right, and their diligence points differ from ordinary property. ① Revenue: in Korea, renewable generation earns the wholesale system marginal price (SMP) plus renewable energy certificates (RECs), and a 20-year fixed-price contract or corporate PPA sharply reduces cash-flow volatility. ② Grid and permits: secured grid-connection capacity, generation and development permits, local setback ordinances, community acceptance. ③ Asset condition: module and inverter performance warranties and remaining life, generation track record, the O&M contract. ④ Demand side: the prospect of a PPA with a nearby RE100 company. Green remodeling of aging buildings and certified green-building development ride the same demand.

Trading Renewable Assets — What to Check

Revenue

SMP (wholesale price) + REC sales · 20-year fixed-price contract or corporate PPA cuts volatility

Grid · permits

Grid-connection capacity · generation and development permits · setback ordinances · community acceptance

Asset condition

Module/inverter warranties · remaining life · generation record · O&M contract

Demand side

400+ RE100 members (as of Sep 2026) · Korean corporates’ supplier requirements · data-center load → PPAs

Without a contract and a grid connection, a plant is a project, not an asset

MarketA renewable asset’s value comes not from the equipment but from a fixed offtake contract and a grid connection. A plant without either is a project, not an asset.

KPMG by your side

Based on its real-estate and infrastructure M&A advisory experience, KPMG provides end-to-end services from deal-structure design through tax optimization, PF advisory, and ESG certification.

Specialist teams covering real estate through infrastructure collaborate to deliver long-term asset-operating perspectives beyond simple sale advisory.

Built on track records across hotels, offices, logistics centers, and golf courses, we propose the deal structure and exit strategy best suited to your asset.

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FAQ

Frequently Asked Questions

How long does the full M&A process take?

A typical process takes 6 to 10 months: preparation (1.5 months), marketing and preliminary due diligence (1-2 months), confirmatory due diligence and SPA (2-3 months), and closing (around 3 months). Timing may vary depending on market conditions and buyer decision speed.

How do you keep a sale confidential?

Confidentiality is the first rule of process design. A project code name, strict NDAs, an anonymized teaser, and a thoroughly logged virtual data room opened only to vetted bidders keep exposure to a minimum, and employees and customers are informed in a set sequence once the deal is signed.

I hear private-equity funds break companies up and flip them. Isn’t that risky?

A private-equity fund is an investor that typically grows a company to sell it for more in three to five years — which only works if the company gets better, so most invest in people, systems and new lines of business. Funds do differ, and checking what happened to the companies a bidder bought before is part of the advisor’s job.

Can I sell while retaining a partial stake?

Yes. With a rollover structure, the seller can retain 10-30% and participate in future upside after the acquisition. It also signals confidence to the buyer.

Why not just sell through someone I know, without an advisor?

You can, but negotiating with a single counterparty gives you no benchmark, so the price tends to come in low and the fine print — warranties, price adjustments, non-compete terms — tends to favor the other side. An advisor runs several bidders against each other and negotiates on your side through diligence and the contract.

How is startup fundraising different from traditional M&A?

Traditional M&A transfers control based on historical EBITDA, while startup fundraising is a bet on future market dominance and requires careful structuring of RCPS, put options, drag-along and tag-along rights, and other investor protections.

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We design the optimal strategy tailored to your company's situation and owner's goals — from divestiture and fundraising to succession and real estate transactions.

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What Is M&A?Preparing for M&A M&A Deal Process and Due Diligence Succession and Owner Exit Understanding Financing Characteristics of Real-Estate Transactions FAQ