South Korea’s cross-border M&A activity remained strong in the first three months of 2020, with the value of cross-border M&A deals accounting for more than one third of the total M&A value.
The value of cross-border deals relating to acquisitions and sales of companies was around 5.27 trillion won in the first quarter, which accounted for 36 percent of the total M&A value of 14.5 trillion won, according to the bell plus compiled based on deals that have completed.
The value of cross-border deals has accounted for around 50 percent of the total over the past three years. Cross-border deals accounted for 25.31 percent of the total value in 2016, 55.58 percent in 2017 and 60.13 percent in 2018, respectively, through the percentage decreased to 45.10 percent last year.
During the first quarter of 2020, inbound cross-border deals where foreign firms buy domestic companies accounted for 24.30 percent of the total M&A value, while outbound deals accounted for around 12 percent. The results bucked the recent trend. Inbound deals accounted for 32 percent of the total M&A value in 2017, 45 percent in 2018, and 27 percent in 2019.
The value of inbound deals exceeded outbound deals during the first quarter due partly to acquisitions by foreign private equity firms such as Macquarie and TPG.
Macquarie PE’s acquisition of Daesung Industrial Gases for 2.5 trillion won was the largest deal of the first quarter. TPG’s acquisition of Health Balance for 280 billion won was also one of the major inbound deals in the same period.
Domestic conglomerates also sold their non-core businesses or their stakes to foreign companies to establish joint ventures. SKC completed its deal to separate its chemical business to set up a joint venture with Petrochemical Industries Company K.S.C. of Kuwait in March. Petrochemical Industries Company acquired a 49 percent stake for 535.8 billion won in the chemical entity.
LG Chem also sold its color photoresist business to a unit of China-based Jiangsu Yoke Technology for 58 billion won in March.
Daelim Industrial’s 618.2 billion won takeover of Carliflex, the chemical business unit of U.S.-based Kraton, was the largest outbound deal in the first quarter. This marked Daelim Industrial’s first outbound acquisition, which was part of the company’s efforts to secure new growth engines.
As cross-border deals account for a considerable share of the overall M&A deals, advisory firms that participate in major cross-border deals rank high in advisory league tables. In the cross-border M&A financial advisor’s league tables, Morgan Stanley, Lazard and Credit Suisse (CS) ranked first, second and third, respectively, while Lazard and CS switched places in the overall M&A financial advisory league tables. In the league tables for accounting and legal advisory, firms who came in first and second in the cross-border M&A league tables secured the same positions in the overall M&A league tables.
(By reporter Han Hee-yeon)