Due to High Interest Rates, Corporate Merger Reviews Drop to 927 Cases... Declining for 2 Consecutive Years

Due to the impact of high interest rates and economic recession, the number of corporate merger review cases decreased for the second consecutive year last year. However, the amount involved in corporate mergers significantly increased due to some large-scale global mergers and acquisitions (M&A).

On the 17th, the Korea Fair Trade Commission (KFTC) announced the '2023 Corporate Merger Review Trends and Key Features' containing this information. This refers to corporate merger cases reviewed by the KFTC last year, which were reported before last year and processed during last year.

The number of corporate merger cases reviewed last year was 927, down 9.7% from the previous year (1,027 cases), showing a decline for the second consecutive year. This was the result of a reduction in transaction volume amid the global trend of high interest rates and economic recession.

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The amount involved in corporate mergers last year was 431 trillion won, an increase of 32.3% compared to the previous year. Despite the decrease in the number of cases reviewed, the total amount increased due to some large-scale M&As, including Microsoft's acquisition of Blizzard (89 trillion won).

Corporate mergers by domestic companies totaled 739 cases, a decrease of 137 cases from the previous year. The amount involved also decreased by 3 trillion won to 55 trillion won.

Among these, mergers involving foreign companies by domestic companies increased both in number (from 11 to 19 cases) and amount (from 500 billion won to 6.2 trillion won). Mergers by large business groups decreased by 12.1% to 231 cases, while the amount increased by 56.8% to 30 trillion won.

By company, SK led with 26 cases, followed by Jungheung Construction (13 cases), Hanwha (9 cases), Naver (8 cases), and Kakao (7 cases).

Mergers by foreign companies increased by 37 cases to 188 cases. The amount involved rose by 108 trillion won to 376 trillion won.

The number of mergers involving domestic companies by foreign companies increased by 9 cases to 49 cases, but the amount decreased by 10 trillion won to 8 trillion won.

By industry, manufacturing accounted for 32.3% (299 cases) of corporate merger reviews, and services accounted for 67.7% (628 cases). Manufacturing mergers were concentrated in the electrical and electronics (86 cases) and machinery and metals (85 cases) sectors, while service mergers were mainly in finance (216 cases) and information and communication broadcasting (83 cases).

The method of corporate merger was stock acquisition in 280 cases, accounting for 30.2% of the total. Other methods included joint venture establishment (201 cases, 21.7%), mergers (197 cases, 21.3%), and executive dual roles (158 cases, 16.8%).

Last year, the KFTC conducted in-depth reviews on 39 corporate merger cases. Among these, two cases judged to have significant competition concerns were subject to corrective measures, and a total fine of 380 million won was imposed on 23 cases that violated the obligation to report corporate mergers.

The KFTC analyzed that there were many corporate mergers last year aimed at strengthening competitiveness through vertical integration in the secondary battery sector and restructuring supply chains in response to the U.S. Inflation Reduction Act.

It also highlighted the establishment of a personal credit evaluation company in the form of a joint venture by five operators, including the three major telecommunications companies, as a notable feature due to deregulation of market entry.

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