Volume of M&As between Korean Companies Reaches Record High

M&As made between Korean companies until September of this year reached the largest-ever volume. Analysis says that M&As were made one after another as the European economic crisis, China’s economic slowdown and low interest rates continued and an improvement in corporate governance and restructuring accelerated.

According to the KDB and Merger Market, an M&A survey company, the volume of M&As in Korea added up to US$79.1 billion, up 25.1 percent from a year before. This amount already surpassed the entire volume of last year. In terms of the volumes of M&As of the January to September periods, the amount is the highest-ever since 2001.

Big deals between Korean companies are made in all industrial sectors at home and abroad. This year, up to the present, the volume of M&As made around the world has reached a total of US$3.290 trillion, which exceeds last year’s US$3.270 trillion, and is about to break through US$3.670 trillion, the highest-ever in history, in 2007.

Also at home, the volume of M&As stood at US$38 billion in 2012, rose 10 percent to US$42 billion in 2013 and grew a whopping 88 percent to US$79 billion in 2014. This is because big deals were made, including an SK C&C-SK Corp. deal (US$24.4 billion), a Hanjin KAL-Korean Air deal (US$15.6 billion), a Daum-Kakao deal (US$3.3 billion) and a Samsung SDI-Cheil Industries (US$3.4 billion).

This year, M&A fever continued, as Samsung and Hanwha made a 6 trillion won (US$5.2 billion) deal. Recently, the Lotte Group took over chemical affiliates from the Samsung Group for about 3 trillion won (US$2.6 billion). SK Telecom also acquired CJ Hello Vision. So the volume of M&As is expected to break last year’s record.

The domestic and foreign M&A fever is expected to become hotter for restructuring, cost cutting and securing new growth engines despite a possibility of a U.S. interest rate hike. At home, a steady increase in the number of so-called “zombie companies” that cannot pay even loan interest due to poor business performances and foreign companies’ investment in Korean IT companies can be a principal factor in expanding the volume of M&As.

“Big firms such as Daewoo Shipbuilding and Marine Engineering and KDB Daewoo Securities are still in the M&A market. The KDB is planning to sell off equity in about 90 companies, so many companies will be put up for sale in the M&A market,” said a representative in the financial industry. “This will naturally lead to a change in corporate governance, having a positive impact on the market.”