Fair Trade Commission to Accelerate Processing of Corporate Mergers for Simple Investment Purposes

[Asia Economy Reporter Eunju Lee] The Korea Fair Trade Commission (KFTC) is accelerating the approval process for corporate mergers and acquisitions (M&A) conducted solely for investment purposes. This aims to promote corporate mergers that do not raise concerns about restricting competition in response to the increasing demand for merger reviews.

Starting from the 30th, the KFTC will revise the standards for merger reviews and the reporting guidelines to expand simplified reviews for mergers conducted solely for investment purposes. Simplified review is a system that quickly approves mergers within 15 days by only verifying the reporting facts for mergers presumed to have no competition restrictions. This is distinguished from the general review, which examines competition restrictions caused by mergers through market definition, market concentration, and economic analysis.

According to the amendment, the KFTC has newly established that simplified reviews can also be applied when additional investments are made to an existing institution-exclusive private equity fund (PEF), participating as a new limited partner. Previously, simplified reviews applied only when participating in the 'establishment' of an institution-exclusive PEF, but this has been expanded. Unlike general partners who have major decision-making authority on the institution’s investment direction, limited partners invest expecting financial returns and hold no voting rights. Therefore, the KFTC considers that limited partners participating as financial investors through additional investments after the PEF’s establishment should be treated the same as those participating at the time of establishment and be eligible for simplified review.

Mergers involving venture companies and new technology businesses exempt from reporting obligations under the Fair Trade Act, where executives concurrently serve, are also included in the simplified review scope. A KFTC official explained, “According to Article 11, Paragraph 3, reporting obligations are exempted for financial stock acquisitions in mergers involving venture companies and new technology businesses. However, it was not considered that companies investing in venture companies often have executives such as directors or auditors concurrently serving and supervising the investee companies.”

When a general company acquires real estate such as land, warehouses, or office buildings for investment purposes, it will also be subject to simplified review. Previously, only real estate investment companies acquiring real estate were eligible for simplified review, but this has been expanded to general companies as well. In addition to the listed types, a general provision has been added to allow simplified review when the purpose is objectively clear as simple investment, such as cases where management participation is prohibited by law.

The ‘safe zone’ for non-horizontal mergers, such as vertical mergers (between businesses at different stages of the supply chain) and conglomerate mergers (between non-competitor companies), has also been expanded. The KFTC will presume that mergers where the combined market share of the merging parties is less than 10% pose no competition concerns regardless of market concentration. The safe zone refers to markets where mergers are presumed not to raise monopoly concerns due to factors such as many participating companies or active market competition. Furthermore, with the expansion of simplified review targets, the reporting form items and required attachments will be simplified, and online reporting will become more convenient.

A KFTC official stated, “This revision will improve the efficiency of corporate mergers. The burden on companies for mergers with low competition concerns will be reduced, and mergers and acquisitions (M&A) will become more active.”

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