Next Year's M&A and Strategic Alliance Investment Boom: "Seize Investment Opportunities"

[Asia Economy Reporter Lee Seon-ae] The heated merger and acquisition (M&A) activity this year is expected to continue unabated into next year. In fact, the prevailing view is that next year will mark the inaugural year of a boom in M&A and strategic alliance investments. Recent personnel and organizational changes in major companies indicate the brewing momentum for M&A. The market anticipates that investment opportunities will be found in sectors where M&A and strategic alliances are emerging.

On the 13th, Eun-taek Lee, Senior Research Fellow at KB Securities, stated, "Next year will be the inaugural year of a boom in M&A and strategic alliance investments," adding, "Amid a flood of liquidity, companies have secured ample cash, and in this 'age of technology,' investments will manifest not as 'infrastructure and facility investments' but in the form of 'M&A'." He further noted, "The reopening of the economy is expected to serve as a signal flare for M&A, and the investment opportunities in the stock market next year lie precisely here."

Particularly among old economy companies, there appears to be a movement to add new growth engines. For example, steel companies (old economy) that are expected to record record-breaking performance this year are likely to focus on transforming into the new economy rather than expanding investments in their existing old economy facilities with the funds they have secured. Companies that have completely transformed from old economy to new economy include LG Chem, Samsung SDI, and SKC. KB Securities emphasized, "Next year, a significant number of old economy companies will aim for mergers and acquisitions and technical alliances," adding, "In this process, there is a possibility of valuation reassessment for some companies, so attention should be paid to certain large-cap value stocks aggressively investing in new growth businesses."

Corporate financial conditions are abundant. Funds raised through strong earnings and initial public offerings (IPOs) are expected to serve as a catalyst for new investments. Song-cheol Kang, a researcher at Eugene Investment & Securities, analyzed, "The cash assets held by companies continue to record all-time highs."

Investment opportunities through M&A are expected to be most promising in small and mid-cap stocks. The three major small and mid-cap growth sectors are content (media, entertainment, games), eco-friendly (batteries, hydrogen, nuclear power, solar power, wind power), and bio. Sectors with a strong small and mid-cap character are still in the early stages of investment formality, with expectations dominating, which is a positive factor for stock prices. Senior Research Fellow Lee said, "The platform industry is showing a tendency for service demand to surge after surpassing a 60% penetration rate (maturity stage), and eco-friendly sectors are expected to see increased demand paradoxically due to recent energy price surges," adding, "Bio, which underperformed this year, could see momentum next year with the resumption of clinical trials."

The most notable sector is bio. In-hwan Ha, a researcher at KB Securities, emphasized, "Among 26 domestic industries, the healthcare sector has seen the largest increase in cash assets compared to pre-COVID-19 levels," adding, "Investment activities in biotech companies are expected to accelerate using the cash accumulated during the COVID-19 period."

The characteristics of year-end personnel and organizational changes in major companies also raise expectations for M&A next year. Samsung Electronics expressed meaningful M&A intentions after President Jung Hyun-ho was promoted to Vice Chairman, SK Hynix promoted M&A expert Vice President Noh Jong-won to President, and LG Electronics elevated the status of its M&A organization from a division to a department. Additionally, SK Group and Shinsegae Group established M&A organizations within their affiliates, and CJ Group Chairman Lee Jae-hyun also expressed his commitment to M&A.

Meanwhile, the M&A market blazed brightly this year. According to CEO Score, a corporate evaluation site, a survey of the top 500 companies submitting third-quarter reports this year showed that acquisition amounts reached 28.8228 trillion KRW, a 128.6% increase (16.2129 trillion KRW) compared to last year's 12.6099 trillion KRW. The number of acquisitions rose 31.3% from 96 cases last year to 126 cases. The total M&A transaction amount for all companies up to the third quarter of this year has already surpassed last year's level and is expected to exceed 50 trillion KRW.

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