South Korea’s cross-border mergers and acquisitions (M&A) activity remained subdued in the third quarter amid Covid-19 related travel restrictions, but some market segments were showing small signs of growth.
The total value of M&A deals was 61 trillion won ($52.5 billion) during the first nine months, with cross-border deals accounting for about 23 trillion won, the lowest share since 2017, according to league tables compiled by thebell that are based on completed deals.
Cross-border deals relating to acquisitions and sales of companies had a total value of around 11.7 trillion won in the nine months to the end of September, a drop of 37 percent from the same period last year. However, cross-border deals relating to mergers, joint ventures, real estate and social overhead capital all recorded increased values over the same period.
Deals relating to acquisitions and sales of companies were valued at about 34 trillion won, with cross-border deals accounting for 34.4 percent, down 14.2 percent year-on-year.
Cross-border deals held a share of only 27.2 percent in the third quarter of this year, after accounting for 38.5 percent and 35.8 percent, respectively, in the first and second quarters. It is the first the share has fallen to the 20 percent level since 2017.
The share of cross-border deals has varied in recent years, comprising 45 percent of total M&A deals in 2019, a 60.1 percent share in 2018 and 55.6 percent in 2017.
An increase in the value of cross-border deals relating to mergers and joint ventures was largely due to Hyundai Motor Group’s 4.79 trillion won joint venture with Aptiv, which accounted for 99.2 percent of the total value of cross-border deals in this market segment in the first nine months.
Inbound cross-border deals involving foreign purchases of domestic companies accounted for 20.8 percent of the total M&A value in the first nine months, while outbound deals accounted for around 14 percent.
The value of inbound deals exceeded that of outbound deals over the same period, due partly to acquisitions led by foreign private equity firms like Macquarie Korea Opportunities Investment (Macquarie PE) and Affinity Equity Partners.
Macquarie PE’s acquisition of Daesung Industrial Gases for 2.5 trillion won and Shinhan Financial Group’s sale of its new common equity shares worth 1.2 trillion won to Affinity Equity Partners and Baring Private Equity Asia were completed in the first quarter of the year.
The largest outbound deal so far this year has been KB Financial Group’s takeover of Prasac Microfinance Institution, the largest microfinance deposit-taking institution in Cambodia, for 702.2 billion won.
Other outbound deals included Daelim Industrial’s acquisition of Kraton’s Cariflex business for 618.2 billion won, SK Siltron’s acquisition of DuPont’s wafer business for 536.6 billion won and SK Global Chemical’s takeover of Arkema France’s high-functioning polymer business for 439.2 billion won. (Reporting by Byung-yoon Kim)