FKI: "Global M&A Must Be Utilized for Post-Corona Competition"

[Asia Economy Reporter Ki-min Lee] As the number of companies on the brink of collapse increases due to the novel coronavirus infection (COVID-19), the global mergers and acquisitions (M&A) market is expected to become more active, and it has been pointed out that Korea must actively utilize this to grow in the post-COVID competition.

The Federation of Korean Industries (FKI) announced on the 23rd that an analysis of the global IT industry M&A market share over the past 15 years shows Korea remains in 12th place with 1.9%. Based on this, the United States holds one-third of the global IT M&A market, ranking first in market share. Following were the United Kingdom (11.0%), France (7.2%), and Germany (5.6%), while China ranked 9th (2.4%).

Looking only at the market share over the past five years, the order remains the same with the United States (25.5%), the United Kingdom (10.8%), France (8.2%), and Germany (6.6%), but China has rapidly risen to 5th place (4.4%). Meanwhile, Korea’s M&A market share over the recent five years remains 12th (2.3%), similar to the past 15 years.

The FKI emphasized that since the innovation cases of companies that changed the IT industry landscape were based on M&A, Korean companies should also make good use of M&A opportunities after COVID-19. The number of global M&A deals in the first half of this year was 6,938, a 32% decrease compared to 10,155 deals in the same period last year, but the transaction volume has been gradually recovering since the third quarter.

In fact, Chinese IT leading companies Tencent and Alibaba have grown into the only two non-American companies ranked in the world’s top 10 by market capitalization through aggressive M&A strategies. From 2008 to February last year, Tencent and Alibaba conducted 713 and 502 M&A and investment deals, respectively.

Kim Bong-man, Director of International Cooperation at FKI, said, “During the 2008 financial crisis, many companies were liquidated, but new opportunities led to significant growth in new industry-related companies. Similarly, after the current COVID crisis, a golden opportunity will soon come due to global industrial tectonic shifts.” He added, “Activating M&A should be actively considered as a stepping stone for our economy to grow significantly in the post-COVID global competition.”

He also stated, “In the digital economy era, technology M&A is a core growth strategy for global companies. China acts like a black hole attracting global advanced companies, and companies like Google, Apple, and Amazon secure new growth engines and create synergies with existing businesses through M&A. To avoid falling behind in M&A utilization strategies, which have been passive so far, Korea must create the most favorable environment for corporate M&A, including institutionalizing the allowance of holding company-type corporate venture capital (CVC) as soon as possible, along with fostering a culture that recognizes M&A as a corporate growth strategy, just like leading overseas companies.”

This content was produced with the assistance of AI translation services.