M&As valued at a record 77 trillion won

Industry

Published: 15 Dec. 2015, 20:24

M&As valued at a record 77 trillion won

This year was the biggest year for the local mergers and acquisitions (M&A) market, where transactions are estimated to reach an all-time record of 77 trillion won ($65 billion).

According to KDB Daewoo Securities on Tuesday, there have been a total of 427 M&As.

Major companies being bought and sold started with Samsung Group selling off its petrochemical affiliates to Hanwha Group late last year. They continued with the merger between SK C&C and SK Holdings, Cheil Industries with Samsung C&T and most recently SK Telecom buying CJ Hellovision, which is to merge with its affiliate SK Broadband.

One of the key characteristics of M&As this year is that the stock value of the companies that were either being purchased or merged went up.

“In the case of the local market, the share price of companies that were sold or to be merged rose more sharply than the buyers,” Yoo Myoung-gan, a KDB Daewoo Securities analyst, said.

After SK C&C officially announced it was acquiring SK Holdings on April 20, the share price of SK Holdings rose 14 percent up until the merger was completed.

The situation was similar to the online platform Daum, which merged with social messenger company Kakao in October last year. In the five months after the acquisition was announced on May 23, 2014, the share price of Daum surged 19.5 percent.

The analyst projected that the trend will likely continue next year.

“Korean companies have a lot of cash reserved, and therefore, the local M&A market will expand further next year,” Yoo said. “There is a strong possibility that Korean companies will be seeking new growth momentum through M&As, especially since there are still uncertainties over the economic recovery while there is a growing burden over having large cash reserves.”

In fact, KDB Daewoo Securities estimated that the top 300 companies by market capitalization holds roughly 128 trillion won of cash or assets that could easily be turned into cash. That’s roughly 32 trillion won more than in 2014.

Korea wasn’t the only economy that enjoyed a high M&A market. The global M&A market was the highest in a decade as the total money transacted during the year amounted to $3.5 trillion.

Major M&As occurred this year, including the world’s third-biggest M&A trade in November, when Pfizer announced that it was buying
botox maker Allergan for $183.7
billion.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]