Market insiders are closely watching eBest Investment & Securities, which has been a potential target in the mergers and acquisitions (M&A) market for some time.

The securities firm’s financial structure has improved thanks to a stable profits trend in all businesses, including retail, wholesale, investment banking and trading. Its revenue rose 84.3% to over 2 trillion won ($1.8 billion) in 2020 and operating income increased by 117.9% to 153.5 billion won. The company’s net income also increased almost 150% in 2019 and total equity grew to 740.6 billion won from 514 billion won.

eBest Investment & Securities plans to hold a rights offering of about 60 billion won to secure working capital, sources said on Tuesday (February 16). It is expected to increase the equity capital to about 800 billion won in the first half of this year.

The securities firm has consistently attracted interest from industry insiders as it is seen as a potential M&A target. They have been reviewing its valuation due to a trend of financial holding companies acquiring securities firms and a change in eBest Investment & Securities’ enterprise value.

Many market insiders have reportedly asked private equity (PE) firm Global & Associates (G&A), the largest shareholder, whether it intends to sell the brokerage.

The firm’s valuation has been rising every year. Two years ago it would have sold for around 500 billion won, but the price is believed to have since risen significantly. As it takes about five years for a securities firm to settle in the market, potential buyers are highly likely to put sizeable brokerages which generate profits on their M&A target list.

“eBest Investment & Securities’ return on equity is ranked highly among securities companies,” an industry source said, adding, “It is one of the targets worth keeping an eye on for potential buyers who are considering acquiring a securities firm, given its improving business structure.”

However, there are mixed views on the brokerage’s business model, which focuses on online business. Financial holding companies tend to prefer securities firms with offline branches, as many plan to sell complex financial products. eBest Investment & Securities was the first online securities firm in South Korea but has four branches.

Another factor in striking a deal will be whether the valuation gap between the company and a potential buyer can be narrowed.

An industry source said that digital transformation and active non-face-to-face transactions increase the appeal of securities firms that specialize in online business, but “the firm will have to show some strengths to persuade financial holding companies which have traditionally created synergies through offline branches”.

G&A acquired a 72.59% stake in eBest Investment & Securities for 218.1 billion won from SBI Korea Holdings and related parties in 2008. It currently owns 61.71%. (Reporting by Ar-rum Rho)

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