Merger reviews hit record high in H1 with 424 cases worth $125.5 bn

  • 2020-08-13

The number of merger reviews has hit a record high in Korea for the first half of the year, with 424 filings made to the Korea Fair Trade Commission (KFTC) valued around $125.5 billion. Of these, 356 cases were led by domestic companies, and 68 cases were led by foreign companies.

This is a 21.5% increase compared to the 349 merger reviews from the first half of 2019. The surge in merger filings could be attributed to companies speeding up restructuring amid the global pandemic, alongside private equity funds actively engaging in M&A deals to secure the next growth areas for their businesses.

Private equity firms accounted for 52 merger cases, a 41% increase from 37 deals during the first half of 2019.

Investment companies and PEFs accounted for six of the top 10 merger review cases in terms of the deal amount.

A merger review is when a country’s antitrust regulator reviews an M&A deal to ensure that it does not violate antitrust law or raise anti-competition concerns. Each jurisdiction has a set of conditions which may require deals to be reviewed before they are finalized.

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The number of merger reviews for domestic companies merging with foreign companies increased to 14 with a 0.9 trillion won increase during the first half of 2020 compared to the 11 from the first half of 2019. Among the merger reviews involving foreign countries, the EU and China showed the most interest in domestic companies, according to the KFTC.

M&A deals involving foreign companies that post over 30 billion won in revenue in Korea are required to file to the KFTC.

There were 356 merger reviews filed by domestic companies worth 18.8 trillion won, 6.1 trillion won more than in 2019.

Service industries accounted for 68.2% with 289 deals followed by manufacturing industries covering 31.8% with 135 deals. The finance, distribution, telecommunications, and broadcasting sectors were prominent within the service industry deals.

As for the manufacturing industry, petrochemicals and pharmaceuticals took the lead followed by machinery and metal as well as electricity and electronics.

The KFTC stated that there was a noticeable increase in M&A deals among non-affiliates — from 194 cases in H1 2019 to 277 cases during H1 2020 — reflecting companies’ efforts to secure the next areas of growth for their businesses. The amount also increased to 17.9 trillion won during the first half, an 8.3 trillion won increase from 9.6 trillion won a year previous.

Merger reviews concerning companies’ restructuring increased by only three cases totaling 79, and the amount dropped significantly from 4.4 trillion won in 2019 to 900 billion won during the first half of this year.

According to the KFTC, the H1 merger reviews show that the global pandemic has driven companies to focus on deals to expand their businesses by securing new growth areas instead of restructuring deals.

 

By Soo-young Seong

syoung@hankyung.com

<Edited by Danbee Lee>