M&As by Korean Companies Shrank While Those by Foreign Firms Soared in 2016

Last year, the number of Korean companies' mergers and acquisitions (M&As) slid, while that of foreign companies climbed. Korean companies refrained from expanding their businesses and focused on their core business capabilities while foreign companies actively engaged in M&As to expand their business scopes.

The Korea Fair Trade Commission stated on March 1 that in 2016, the number of Korean and foreign companies’ corporate combinations fell by 23 from 2015 in its reviews of combination of enterprises in 2016. In terms of amounts, they added up to 593.6 trillion won and recorded a 58-percent increase year on year.

Korean companies were passive in both acquiring new businesses and restructuring themselves. The number of Korean companies’ M&As slid to 490 cases, down 44 from the previous year and the amount declined 53 percent to 26.3 trillion won. Combination with non-affiliates which can be seen as actual M&As shrank 22.6 percent to 21.9 trillion won. Corporate combinations among affiliates which can be called “restructuring” also fell by 84.3 percent to 4.4 trillion won. In particular, business groups concentrated on increasing their core business capabilities while restraining the excessive expansion of their business. The size of business combinations by business groups halved to 11.1 trillion won, which was 58.4 percent compared to last year.

"In the case of large conglomerates in Korea, five M&A deals worth more than 1 trillion won, each, were struck in 2015, but only two deals were sealed last year," said an official at the Korea Fair Trade Commission. “The fact that both the number and amount of corporate combinations with affiliates which were virtually restructurings contracted indicates that restructurings by business groups have entered the homestretch since beginning in 2014.

M&As by foreign companies stood at 156 cases, a year on year increase of 21. In terms of amount, they added up to 567.3 trillion won, surging 74.2 percent. However, the amount of foreign companies' acquisitions of Korean companies amounted to 3.2 trillion won, which inched down from the previous year (5 trillion won). Although M&As between foreign companies have been vitalized, foreign companies’ investment in Korean firms is contracting.