Outbound merger and acquisition (M&A) activities by South Korean companies fell sharply in the first six months due to the bleak Covid-19 economic outlook and resultant liquidity crunch, with declines in the total number of deals and their values.
According to thebell, the largest capital market news platform in Korea, outbound deals shrunk to around four trillion won ($3.33 billion), compared with 10 trillion won in the first half of 2019. The number of outbound deals dropped to 21, from 33 in the same period last year.
No outbound deal exceeded one trillion won during the first half of this year, compared with four in the same period last year, including fabricated quartz maker Wonik QnC’s acquisition of quartz and ceramics business units owned by New York-based company Momentive Performance Materials for $266 million.
In other 2019 deals, CJ CheilJedang acquired leading U.S. food business Schwan’s Company and several of its subsidiaries for $1.84 billion, Hanon Systems completed the acquisition of the Fluid Pressure & Controls business of Magna International Inc. for approximately $1.2 billion and SK invested $1 billion to buy a 6.1% stake in Vietnam’s biggest company Vingroup.
In contrast, the biggest outbound deal so far this year has been KB Financial Group’s takeover of Prasac Microfinance Institution, which amounted to only $603 million. In April KB’s banking unit acquired a 70 percent stake in Prasac, the largest microfinance deposit-taking institution in Cambodia.
However, there have still been several small but significant deals this year as companies look overseas to build global competitiveness and enter new businesses. Daelim Industrial Co., Ltd.’s acquisition of the Cariflex™ business unit from Kraton Corp. for $530 million in March was one good example of this trend. With its first outbound deal, Daelim set the stage for nurturing high value-added petrochemical businesses.
Korean semiconductor wafer maker SK Siltron’s takeover of the silicon carbide wafer business of DuPont for $450 million in September was also notable as it is expected to help the firm expand its presence in the competitive market, which has been dominated by U.S. and Japanese companies.
In another important deal, SK Global Chemical completed the acquisition of the functional polyolefin business of French chemical firm Arkema S.A. in June, giving its growth vision impetus through high value-added products. This was the first European M&A for the company.
LG Household & Healthcare acquired the license to market products by cosmestics brand Physiogel in Asia and North America in February from global pharmaceutical company GlaxoSmithKline for $161 million. (Reporting by Hyeran Kim)