Amid COVID-19 Pandemic
KB Kookmin Bank acquired Prasac Microfinance in Cambodia in April this year. It is currently the only cross-border deal of listed South Korean companies this year. Prasac is the largest micro-lending institution in Cambodia and KB Kookmin Bank acquired 70 percent of the company for 734 billion won.
For years, major South Korean corporations were very aggressive in cross-border M&A for overseas opportunities. For example, the KCC consortium took over Momentive Performance Materials by investing 3.48 trillion won, CJ Cheil Jedang took over Schwan’s Company for approximately 1.5 trillion won and Hanon Systems took over an arm of Magna International for 1.38 trillion won last year.
Things have drastically changed this year. South Korean companies are refraining from intra-group as well as cross-border M&As in the wake of COVID-19. LG Group, which disposed of non-essential units for years for cash flow improvement, is not moving in the M&A market. Samsung Electronics’ M&A activities are on hold due to the judicial uncertainties related to its vice chairman.
Another reason is that most of South Korean companies’ past M&A adversely affected their financial conditions. KCC’s total borrowings soared to 5,042 billion won after the acquisition, and then major credit rating agencies lowered its rating from AA to AA-. Likewise, Hanon Systems was given a negative credit rating after the deal.