Several food and coffee franchises in South Korea have been put up for sale this year, giving the sluggish local mergers and acquisitions (M&A) market a shot in the arm, industry watchers said Monday.

Early this year, South Korea's leading buyout fund VIG Partners sold the local chain of Burger King to a Hong Kong-based private equity fund, heralding the start of M&A activity in the local food franchise sector.

In the latest case, Hollys F&B, which operates Hollys Coffee Co., is pushing to sell the South Korean coffee shop chain, drawing interest from several foreign investors.

According to the sources, lead manager Deutsche Securities Korea Co. plans to receive preliminary bids for Hollys F&B on Thursday from prospective buyers. About 10 domestic and foreign investors have reportedly expressed interest in taking it over.

Local buyout fund IMM Private Equity, which runs Hollys F&B, is slated to short-list five qualified bidders and allow them to conduct due diligence before soliciting formal bids at the end of September.

On top of Hollys F&C, competition is intensifying for the Korean unit of US fast food chain McDonald's Corp. In late June, CJ Group, a South Korean food and entertainment conglomerate, joined the race to vie with two local prospective buyers.

McDonald's, which directly manages about 400 stores in South Korea, has been looking for local partners to run them as franchise stores that pay annual commissions instead.

In addition, Global private equity fund Unison Capital Korea is reportedly moving to sell the local tea shop franchise Gong Cha Korea in the second half of the year while watching the situation surrounding the sale of Hollys F&B. Unison Capital has been running the franchise after buying a controlling stake in 2014.

Market watchers said the brisk M&A activity in the food franchise market stems from the fact that the industry is nonsensitive to the business cycle and can generate a stable flow of cash.

"Financial investors tend to prefer food franchises that are less risky than manufacturing companies," an analyst said on condition of anonymity. "Franchises with growth potential in South Korea's provincial areas, China and Southeast Asia can be attractive to investors." (Yonhap)