Searching for New Growth Engine of Korea, Global M&A

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Hello, everyone! How’s your summer going? Hope you haven’t lost your battle with extremely hot weather. Today I’d like to give you a current overview of Korean M&A market and its trend. It is undoubtedly true that the global economy has lost its steam of growth. In fact, it is in a long way of recessionary period due to the sequential financial turmoil in European countries. This is even worsened by the prolonged economic recession in advanced countries including United States. It implies that emerging countries with a relatively stable and healthy economic condition at the moment are never completely immune to this downturn trend of the global economy. Korea, the 4th largest economy in Asia with its export-oriented economy, is also losing its ground of economic growth. Why? This is because the major importing countries have lost their sentiment to purchase Korean exports. In order to get through this situation, some companies are anxiously seeking global M&A: buying foreign companies in sales which are holding the proprietary technologies. According to the latest report from KIEP (Korea Institute for International Economic Policy), Korean companies acquired more foreign companies or asset, compared to domestic companies or assets.

 

This represents that the large Korean companies, also known as conglomerate, are looking for an opportunity to buy foreign companies or assets whose intrinsic values were undervalued amid the financial crisis. For instance, Samsung Electronics, the South Korean tech giant, successfully bought five tech-related foreign companies in two years. Similarly, SK acquired the global computer memory ship company Hynix. Later, they successfully bought a couple of memory related foreign tech companies in a row.

Frankly speaking, the crisis and trouble could turn out to be a great opportunity for some people, while others got trapped in the problem. For example, during the last 90’s financial crisis when Korea received the IMF bailout package, major foreign companies sought to purchase valuable Korean companies at cheaper prices. The significance of and need for the global M&A was suggested by the minister of MKE (Ministry of Knowledge and Economy) saying, “even though global economy looks pretty bad, Korean economy is doing relatively better than others. For this trend, Korean companies should continue to put their efforts to implement global M&A.” In order to retain the viability of companies and new growth engine, global M&A is regarded absolutely necessary for Korean companies.

 

 

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