Slow Mergers and Acquisitions
The Korea Economic Research Institute recently announced that Google conducted 154 M&As between 2010 and Sept. this year, whereas the number was limited to 37 for Samsung Electronics.
These days, global companies are working on an increasing number of M&As for business reorganization. For example, Google is continuing to acquire firms in various fields, including 3D printing and software for use in self-driving cars. IBM is shifting the focus of its business from computing to services, while GE is veering toward finance and energy from consumer electronics. In the energy industry, Royal Dutch Shell took over the BG Group in April this year to beat ExxonMobil and become the largest player in the sector. Novartis and GlaxoSmithKline recently exchanged their business units, too.
On the contrary, Korean companies are rather slow in reorganizing themselves. Between 2000 and 2014, only five companies – Samsung SDI, LG Corporation, Hanwha Techwin, Doosan Corporation, and Eusu Holdings – changed their types of business. Also, the characteristics of LG, Doosan, and Eusu rarely changed, because their changes were for conversion into holding companies. During the last four years, Korean companies showed no change when it comes to the ranking of aggregate market values, which implies that domestic industries are in the middle of the lack of vitality.
“Systemic improvements need to be prepared for Korean companies to be engaged in large-scale business reorganization, but measures to that end still seem to be far away,” the institute explained, adding, “The Korean government would be well advised to refer to other countries’ examples such as tax incentives.”