In the first half of this year, the number and amount of domestic M&A transactions reached the highest ever recorded. The number of overseas acquisitions was the highest ever. Domestic companies competed for non-core assets to prepare live ammunition and set out to hunt for sale to increase their market dominance in core businesses and future new industries. M&A competition in the platform field has also heated up this year.
According to Market Insight, a media specialized in the capital market, the Korea Economic Daily on the 27th, the number of M&A (main contract signing, management rights transaction) transactions in the first half of this year was 160, the highest since 2012 when counting began. The transaction amount also reached a record high of 52.9 trillion won. In the first half of the year, it already surpassed last year’s total transaction amount (52.57 trillion won). Transactions worth 50 billion won or more nearly doubled from 39 in the first half of last year to 77 in the first half of this year.
Conglomerates have ignited the heat by injecting trillions of dollars into M&As to strengthen their core businesses. Shinsegae Group invested 3.4 trillion won to acquire eBay Korea, becoming an e-commerce (e-commerce) powerhouse following Naver Shopping. SK Group invested 10 trillion won in SK Hynix’s acquisition of Intel’s NAND flash division at the end of last year, and this year it bought four waste companies.
The progress of the ‘Rising Stars’ was also remarkable. Centroid PE, a new private equity fund manager, acquired TaylorMade, one of the world’s three largest golf brands, for 1.9 trillion won. held There were also 7 mega deals in the first half of this year, the most in history, with transactions of more than 1 trillion won.
The number of domestic and foreign transactions (cross-border deals) was 27 in the first half of the year, the highest ever. Examples include Naver’s acquisition of the web novel platform Whatpad (680 billion won) and the sale of HyperConnect (1.9 trillion won), which operates the dating app Azar.
The trillion-dollar M&As are expected to continue in 2H. Big companies such as Yogiyo, Daewoo E&C, Hanon Systems, and Hugel are in the process of selling. Graphic = Reporter Huh Rami
An all-time hot M&A
M&A already 50 cents… Companies transforming into ‘quick hunters’ in the face of the Corona crisis “I’ve been working as an ‘IB (investment bank) man’ for 23 years, and this is the first time I’ve seen such a ‘big market’. More M&As have been made than ever before, and the paradigm of deals has changed dramatically.” (Credit Suisse Vice Chairman Lee Cheon-ki)
Over the past year or so, companies have moved with unprecedented breathlessness in the M&A market. In Korea, large-scale takeover battles were held almost every week, and even when the sky was blocked by Corona 19, the largest overseas company hunting was conducted. Companies that seized the opportunity to become an overwhelming leader in new and core businesses also conducted trillion-dollar transactions at once. On the one hand, the business that had been in operation for decades was closed without any regrets. Platform companies stood out especially this year. Naver and Kakao have expanded into the global market by hunting companies based on decision-making speed and flexibility. This is a characteristic of the M&A market this year. Speed instead of weight… Companies that have become more flexible Companies have started to lighten their assets all at once. Last year, LG sold the Beijing Twin Towers, a key asset in Beijing, China, and also liquidated LG Chem’s polarizer business. Earlier this year, it decided to withdraw from the smartphone business. Instead, it established a joint venture with global company Magna (LG Electronics) and started to make a new move to shift the weight to the automotive electronics business.
SK made a change that also laid down the ‘communications and oil refining’ that was the origin. Following SK Lubricants, they even sold their stake in SK Global Chemical to improve asset efficiency. SK Telecom split the company into a telecommunication company and an investment company, saying that it would no longer remain a telecommunication company. The core division, including President Park Jung-ho, has moved to an investment company instead of a telecommunication company and declared that it would be evaluated in the market for its M&A performance.
Offline retailers that were engulfed in the ‘Coupang shock’ also risked their lives in M&A by offering their core assets. Lotte Group announced that it could provide collateral to financial companies up to the headquarters of Lotte Department Store in Sogong-dong, Seoul ahead of the takeover of eBay Korea. CJ Group concentrated its capabilities on logistics (CJ Korea Express) and media (CJ ENM), where it has strengths, and decided to borrow external power for the platform and exchanged shares with Naver. The Sejin K-Power Korea’s representative companies have invested trillions of won in cash to become the global No. At the end of last year, SK hynix took over the Intel NAND division worth 10 trillion won and solved the controller technology problem at once. Hyundai Motor Group, which had a difficult time finding a presence in the M&A market after its acquisition of Hyundai E&C in 2011, also established a joint venture with global autonomous driving company Aptiv in 2019. Last year, it took over Boston Dynamics and surprised the market.
This year, the ‘Rising Stars’ took over the baton. Hive, the agency of BTS, embraced Ithaca Holdings, a global label, and Centroid, a new private equity fund, owned TaylorMade, the world’s three largest golf brands.
Overseas big deals are expected to pour in in 2H. Samsung Electronics, which holds 100 trillion won in cash, informed shareholders that it would soon make a meaningful M&A. LG Group is also actively promoting overseas M&A market entry based on its accumulated live ammunition. IB men are looking for LG Twin Towers in Yeouido, Seoul to take the LG Group deal. The battle between Kakao and Naver is fierce in the platform blood-to-play M&A market everywhere. When Naver acquired the global No. 1 web novel platform Whatpad earlier this year, Kakao immediately countered by embracing the American webtoon and web novel platforms Radissy and Tapas at the same time. The two companies competed for management rights of web novel platform Moonpia and SM Entertainment.
Platform wars were fought everywhere. When Shinsegae took over the clothing platform W Concept, Musinsa also bought 29CM from its rival StyleShare. Kakao went one step further by acquiring ZigZag. Hundreds of billions of won in cash flowed into ‘unicorns’ can now be commonly found in unicorn companies’ investment attraction transactions. The number of unicorn companies, which had only three in 2016, has now grown to more than 13. Market Kurly recently attracted an investment of 200 billion won and was evaluated to have a corporate value of 2 trillion won. Yanolja, Toss, and Musinsa also started to attract investment. Yanolja is worth 10 trillion won, Toss is 8 trillion won, Musinsa is 2.5 trillion won. Investors are lining up in front of reserve unicorns that have been recognized for hundreds of billions of won in ransoms such as the carrot market, clothing platform Avely, reading platform Reddy Books, and education platform Ruid. Story instead of ‘Multiple’ The method of judging the company’s value during that time was ‘how many years of cash should I collect to recover the acquisition cost?’ In the traditional manufacturing sector, 10 times the EBITDA before amortization, and 11 times for the F&B business. Such a ‘fair price’ is now an outdated theory. Now that it is difficult to predict how the industry will change next year, we are faced with the question of whether it is possible to assume the cash flow every year.
Most of the companies, such as eBay Korea, HyperConnect, Yanolja, Ithaca Holdings, and ZigZag, which are in the red or make profits of tens of billions of won a year at most, have been recognized for a ransom of over 1 trillion won. Creating a ‘story’ that replaces the ‘calculator’ will determine the success or failure of the M&A market.
Reporter Junho Cha/Jongwoo Kim [email protected]
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