Mergers and acquisitions increase in 2019 first half

The number of mergers and acquisitions (M&A) activities by companies in Korea increased during the first half of this year from a year earlier despite the growing protective trading environment globally.

Yet it was mostly foreign entities in Korea that were leading the activities, as local companies remained rather inactive during the period.

According to a report Sunday from the Fair Trade Commission (FTC), the number of reported local M&As reached 349 cases between January and June this year, up 3.9 percent from 336 cases reported during the same period last year. The aggregate value of the M&A cases surged 15.1 percent on-year from 175.4 trillion won ($144.5 billion) to 201.9 trillion won.

It was mostly foreign companies in Korea that led M&As during the first half of this year. The M&As involving foreign companies grew on-year from 70 cases to 79 cases. The value of these deals also grew from 152.8 trillion won to 189.2 trillion won.

The number of M&A cases between two foreign companies increased 19 cases on-year to 60. The accumulated value of these deals also sized up 35 trillion won to 185.5 trillion won. Such foreign-to-foreign deals made during the first half this year included an 83 trillion won-worth merger between Bristol-Myers Squibb and Celgene, a 38.1 million merger between IBM and Red Hat, and a merger between BCP and Johnson Controls valued at 14.9 trillion won.

The number of cases where foreign companies took over Korean ones decreased 10 cases on-year to a total of 19 cases during the first half of this year, but the aggregate value increased 400 billion won to 3.7 trillion won during the same period.

Major foreign takeovers of Korean firms included the purchase by Hong Kong-based private equity fund Anchor Equity Partners of CJ Foodville’s franchise cafe Twosome Place and New York City-based Blackstone Group’s purchase of a 46-percent stake in local wholesale drug distributor Geo-Young.

While foreign companies stayed active during the first half of this year in merging and acquiring stakes of others, Korean companies stayed rather dormant, as the total value of their M&As fell 41.2 percent on-year to 21.6 trillion won even though the number of cases increased from 266 cases to 270 cases.

The FTC said it expects the second half of 2019 will be the time for local companies to increase their M&A activities, as the recent export restrictions from Japan has triggered them to size up their industrial competitiveness.

At the moment, the agency is reviewing three major M&A cases between Korean companies including a merger between Korea Shipbuilding & Offshore Engineering and Daewoo Shipbuilding & Marine Engineering.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]