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M&As

Korea Inc emerges as big buyer in global M&A market

Major global M&A deals more than double in Jan-Sept as more IBs, firms on sale want Korean buyers

By Oct 05, 2021 (Gmt+09:00)

Kraton's Ohio plant. South Korean DL Chemical acquired Kraton
Kraton's Ohio plant. South Korean DL Chemical acquired Kraton

South Korean companies are emerging as big buyers in the global mergers and acquisitions (M&A) markets. They are actively looking for future growth engines with swift decision making and bold investment.

Global acquisitions worth more than 100 billion won ($84.2 million) by South Korean firms totaled at 12 cases except simple equity investment in the first nine months of the year, more than a double of five deals in the whole of 2020, according to Market Insight, the capital news outlet of The Korea Economic Daily, on Oct. 4. There were six deals of the size in 2019 and eight in 2018.

Among the acquisitions in the January-September 2021, seven exceeded 500 billion won, more than a triple of just two last year.

In September, South Korean game developer Netmarble Corp. bought the world’s No. 3 social casino game publisher SpinX Games for 2.5 trillion won, marking the largest takeover by a company in the country so far this year.
SpinX's social casino game Cash Frenzy (Courtesy of SpinX)
SpinX's social casino game Cash Frenzy (Courtesy of SpinX)

A Seoul-based private equity (PE) firm Centroid Investment Partners purchased TaylorMade Golf Co., a California-based golf equipment sponsor of Tiger Woods at 1.9 trillion won, while DL Chemical Co., South Korea's leading petrochemical company, also acquired Texas-based specialty chemical manufacturer Kraton Corp. for 1.9 trillion won. HYBE Co., the label behind BTS, took over Ithaca Holdings, a US-based integrated media company behind artists including Justin Bieber and Ariana Grande, at 1.1 trillion won. Hyundai Motor Co. acquired the US robotics firm Boston Dynamics Inc. from SoftBank Group for about 1 trillion won.

Such deals were to grow in size and expand global market shares by acquiring overseas companies with technologies and product competitiveness.

FOR FUTURE GROWTH ENGINES

In the past, South Korean companies had focused on M&A in emerging markets to immediately raise sales. But they now aim to secure future technologies and enter developed markets through buyouts.

Among the 12 deals in 2021, they bought eight US companies and two European firms in various sectors including secondary batteries, bio, hydrogen, renewable energies, petrochemicals and robots.

“A few years ago, Korean companies had little presence in the market, but many are looking for Korean names now when there are good firms for sale,” said source from a global investment bank (IB). “Korean companies are active in the market and many companies to be sold also want to be acquired by Koreans.”

In August, Hanwha Solutions Corp., the energy unit of chemicals-to-financial conglomerate Hanwha Group, announced it would spend 727 million euros ($843.6 million) to buy a 100% stake in RES Mediterranee SAS, a French wind and solar power plant operator.
Wind power generator developed by RES
Wind power generator developed by RES

The announcement shocked the global IB industry and foreign media since major European companies such as French energy group Total, construction company Vinci and Germany’s top utility company RWE were expected to be named as potential buyers of RES.

But Hanwha Solutions’ bold bet drastically changed the situation.

“It was unexpected, given speculations that RES would of course have been to be taken over by a European company,” said an industry source. “Hanwha Solutions with a just 10-year experience in the solar power business became a global key player through the acquisition.”

TO WIN KOREAN HEART

Global IBs are proposing more to advise South Korean companies on M&A and initial public offerings (IPOs) this year. Conglomerates such as SK and Hanwha that are actively looking for business expansions, receive about 40-50 proposals a month, according to an IB source.

A few years ago, it was regarded as “insane” for global IBs to advise the country’s companies as they did not try much and few deals were successful. IBs gets huge fees only for successful deals.

The recent major investments in US and European companies in bio, hydrogen and renewable energy sectors changed such perspective.
Yposkesi acquired by SK Inc.
Yposkesi acquired by SK Inc.

SK Inc., the holding and investment company of SK Group, acquired a 70% stake in Yposkesi, a French bio contract manufacturing organization (CMO), indicating South Korean companies have grown in status in the global M&A markets. The bio CMO sector had so high barriers that few companies had even attempted an acquisition.

Many of global pharmaceutical makers and PE firms showed interest in Yposkesi when it was placed on sale. But SK Inc. announced an exclusive talk for an acquisition in November last year and signed a deal in March.

“Nobody expected SK to buy it,” said an IB source.

Yposkesi chose SK as it wanted a strategic investor to support its growth for a long term.

LG Electronics Inc. formed an electric vehicle (EV) powertrain joint venture with Magna International Inc. as the Canadian auto parts maker was known to have proposed it. Hyundai Motor bought Boston Dynamics after the robot maker was understood to have suggested a sale.

NOT ONLY TOP 10 NAMES

South Korea’s top 10 conglomerates are not the only ones in the spotlight in the global M&A market.

DL Chemical’s takeover of Kraton surprised the global industry with a deal dubbed as “a South Korean David’s acquisition of a US Goliath.” DL Chemical, formerly known as Daelim Industrial Co., is a petrochemical unit of DL Holdings Co., the country’s 18th-largest conglomerate.

K-content producers such as HYBE and Naver Corp. are also emerging as a key player in the global M&A Market.

HYBE, formerly Big Hit Entertainment Co., acquired Ithaca Holdings for $950 million, beating Blackstone Inc., one of the world’s top PE firm, which teamed up with Disney’s chief financial officer in the takeover battle.
HYBE-Ithaca merger puts BTS, Justin Bieber under one roof (Courtesy of www.justinbiebermusic.com)
HYBE-Ithaca merger puts BTS, Justin Bieber under one roof (Courtesy of www.justinbiebermusic.com)

“South Korean companies are expected to keep receiving love calls from global IBs and firms to be sold, given increasing investment in new industries,” said an IB source.

Write to Kyung-Min Kang and Jun-ho Cha at kkm1026@hankyung.com

Jongwoo Cheon edited this article.

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