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M&As

Korea’s M&A market heats up with record deals in first half

With big names such as Hanon and Daewoo up for grabs, M&A fever will continue into the second half

By Jun 27, 2021 (Gmt+09:00)

Korea's M&A market is heating up.
Korea's M&A market is heating up.

South Korea’s merger and acquisition market is heating up as both big conglomerates and promising startups seek to buy out businesses with growth potential to gear up for the post-pandemic era.

The domestic M&A market saw record deals in terms of volume and value in the first half of this year, according to a tally by Market Insight, the capital market news outlet of The Korea Economic Daily.

Korean companies’ acquisitions of overseas rivals or cross-border transactions also reached all-time high levels, the Market Insight calculation showed.

According to the tally, a total of 160 M&A deals worth 52.9 trillion won ($46.9 billion) were clinched so far this year. By comparison, M&A deals involving the transfer of management rights stood at 52.57 trillion won for the entire 2020.

Deals worth more than 50 billion won were 77 cases in the first half of this year, nearly double the 39 deals in the same period a year ago.

“I’ve never seen this big of an M&A market in Korea since I started working in the investment banking industry 23 years ago,” said Lee Chun-kee, vice chairman of Credit Suisse Korea. “The paradigm of M&A deals has also changed significantly.”

BIG FIRMS LEAD M&As

Big companies have aggressively jumped into the M&A market, while disposing of non-core, unprofitable businesses to raise funds needed for buyouts.

Last week, Shinsegae Group clinched a 3.44 trillion won deal to acquire 80% of eBay Korea to emerge as the runner-up in the country’s e-commerce sector just behind market leader Naver Corp.’s Naver Shopping.

Korea’s M&A market heats up with record deals in first half

SK Group has acquired four waste disposal or treatment companies this year, following the 10.3 trillion won ($9 billion) all-cash deal last year by its chip-making unit SK Hynix Inc. to buy Intel Corp.’s NAND memory chip business.

Big conglomerates have become nimble in pursuing M&A targets.

LG Electronics Inc. in April decided to exit from the mobile phone business after struggling to make a profit for more than two decades.

Instead, the electronics unit of LG group is focusing on the auto parts business by launching an electric car component joint venture with Canadian firm Magna International Inc. The JV, tentatively named LG Magna e-Powertrain Co., will launch on July 1.

SK Group, which previously focused on telecommunications and oil businesses, has conducted restructuring to realign its business portfolio in pursuit of more M&As.

In April, SK disposed of its stake in SK Lubricants Co. to raise money for its expansion of the electric vehicle battery business.

SK Telecom Co. also announced in April a spin-off plan to create a new entity, called SKT Investment Co., to seek acquisitions and oversee its portfolio outside the telecom sector.

ENTERTAINMENT, SPORTS BEHEMOTHS

One of the conspicuous buyout deals was the 100% stake purchase in April by HYBE Corp., formerly Big Hit Entertainment Corp., of Ithaca Holdings, a US-based integrated media company representing artists including Justin Bieber and Ariana Grande, at 1.19 trillion won.

Korea’s M&A market heats up with record deals in first half

The Korean music label behind global boyband sensation BTS said at the time it is pursuing inorganic growth to reduce its reliance on BTS and also bring other K-pop stars to the global stage.

In the sports world, Korea’s lesser-known private equity firm Centroid Investment Partners in May acquired US sports equipment manufacturing firm TaylorMade Golf Co. for 1.8 trillion won, marking the largest-ever acquisition in the golf goods industry.

The domestic market saw six mega-deals worth more than 1 trillion won each in the first half, a record for any half-year period.

Cross-border deals also reached a record high with 27 cases in the first six months of the year.

PLATFORMS

Competition between the country’s two largest online platforms – Naver Corp. and Kakao Corp. – has been fierce, as each jostle to strengthen their position not just on their home turf but also in overseas markets.

Naver said in January it is acquiring a 100% stake in Wattpad, the world’s largest web novel platform based in Toronto, for 684.8 billion won.

In heated rivalry, Kakao Entertainment Co., majority-owned by the mobile messaging app operator Kakao Corp., then acquired US-based mobile fiction startup Radish Fiction Inc. and the third-largest US digital comics platform Tapas Media Inc.

More recently, SM Entertainment Co., the label behind the global K-pop phenomenon, is also up for grabs in the M&A market as the battle between Naver and Kakao to lead the platform market heats up.

Korea’s M&A market heats up with record deals in first half

UNICORNS

Startups, which used to engage in deals usually worth tens of billions of won at maximum, have increasingly raised their valuations, resulting in mega-deals.

Yanolja, Korea’s largest travel platform, successfully attracted $2 billion from Vision Fund, led by billionaire SoftBank founder Masayoshi Son, in May.

With the backing of Vision Fund, Yanolja plans to expand its business through M&As and seek a US listing as early as 2023.

Korea’s M&A market heats up with record deals in first half

Meanwhile, mobile financial platform Toss is set to become the country's first fintech decacorn, or a company valued at over $10 billion, raising 460 billion won at a valuation of 8.2 trillion won in the latest funding round last week.

Analysts said the M&A fever will continue into the second half with big names such as food delivery platform Yogiyo, Daewoo Engineering & Construction Co., Hanon Systems Corp. and Hugel Inc. up for grabs.

Write to Jun-Ho Cha and Jong-Woo Kim at chacha@hankyung.com

In-Soo Nam edited this article.
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