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KFTC M&A Review Trends in 2021

1. Overview
The Korea Fair Trade Commission (led by Chairperson Sung-wook Joh, hereinafter the “KFTC”) analyzed and announced its M&A review trends in 2021. The KFTC reviewed a total of 1,113 M&A cases in 2021, which was a 248 (865→1,113 cases, 28.7%↑) increase from the previous year. Total value reached KRW 349 trillion, up KRW 138.8 trillion (KRW 210.2→349 trillion, 66%↑) from year earlier.

* The analysis reflects only transactions subject to notification requirements under the Monopoly Regulation and Fair Trade Act (MRFTA) and thus reviewed by the KFTC

The total number (+222 cases, 30.3% ↑) and value (+KRW 28.4 trillion, 78.6% ↑) of M&A (954 cases, KRW 64.5 trillion) in which notifying parties were Korean firms both soared in 2021. In particular, M&A deals pursued by large business groups subject to disclosure recorded a 10-year high. The total number (168→133→159 cases) and transaction value (KRW 418.4→174.1→284.5 trillion) of M&A where notifying parties were foreign firms rebounded after a slowdown in 2020 due to COVID-19. The total number of M&A deals where foreign companies acquired Korean firms increased to a 5-year high (41→28→49 cases).

* Compared to pre-pandemic levels in 2019, the number of M&A deals surged in 2021 while overall value stood at 78% of 2019 levels and showed signs of recovery. The total share of M&A between affiliates increased (20.9%→23.3%) as the number of cases by 78 (181→259 cases, 43.1%↑) while the number of M&A between non-affiliates increased by 155 (684→854 cases).

When analyzing M&A deals by sector, the number of M&A in the services sector recorded 346 cases (31.1%) while the number of M&A in the manufacturing sector recorded 767 cases (68.9%). Deals related to electricity and electronics (54→90 cases) and petrochemical and pharmaceutical (60→95 cases) in the manufacturing sector as well as deals related to finances (189→241 cases), IT and broadcasting (73→105 cases) and construction (39→54 cases) in the services sector showed a notable increase.

2. M&A trends by notifying party

A. M&A where notifying parties were Korean firms

The number of M&A* deals where notifying parties were Korean firms increased by 222 (732→954 cases) while value was up by KRW 28.4 trillion (KRW 36.1→64.5 trillion) from a year earlier.

* The KFTC only reviews transactions between Korean-Korean firms and Korean-foreign firms. However, in cases where foreign companies are target companies, the KFTC only reviews deals where total turnover in the Korean market is KRW 30 billion or higher.

The total number of M&A between Korean firms increased by 222 (711→933 cases, 31.2%↑) while value increased by KRW 17.6 trillion (33.5→51.1 trillion, 52.5%↑) compared to the previous year. In addition, the total number of cases* where Korean firms acquired foreign companies was the same as that of last year (21 cases), but overall value rose by KRW 9.9 trillion (KRW 2.5→13.4 trillion) which was fueled by large scale M&A in the semiconductor sector.

Moreover, M&A among affiliates (176→250 cases, 42.0%↑) and among non-affiliates (556→704 cases, 26.6%↑) all increased, and there was an increase in the share of M&A between affiliates (24.0%→26.2%). The value of M&A between affiliates (KRW 4.6→10.8 trillion, 134.8%↑) pursued for business restructuring, soared by more than two-fold and the number of mergers showed a notable increase by 50.1% (136→205 cases). In addition, the value of M&A between non-affiliates (KRW 31.5→53.7 trillion, 70.5%↑) aimed at securing new growth engines, increased by KRW 22.2 trillion (KRW 31.5→53.7 trillion, 70.5%↑).



Compared to the previous year, the total number of M&A pursued by large business groups subject to disclosure increased by 89 (213→302 cases, 41.8%↑) while overall value surged by KRW 21.5 trillion (KRW 11.8→33.3 trillion, 182.1%↑). SK group (25) notified the largest number of M&A transactions, followed by Mirae Asset (21), Kakao (17), Korea Investment Holdings (15) and Lotte (14) group.

* Regarding cases involving Mirae Asset and Korea Investment Holdings, most M&A deals were in the form of concurrent holding of an executive position and establishment of a private equity fund.

The total number of M&A between affiliates of large business groups increased by 33 (71→104 cases, 46.5%↑) and overall value rose by KRW 7.6 trillion (KRW 1.0→8.6 trillion, 760%↑). Such M&A deals were on a downward trend since 2018, but the number of cases and transaction value both soared due to large-scale mergers and acquisition of business.

* Total number of M&A deals among affiliates: (`17) 68 cases→(`18) 111 cases→(`19) 69 cases→(`20) 71 cases→(`21) 104 cases
* Total value of M&A deals among affiliates: (`17) 7.3 trillion→(`18) 18.7 trillion→(`19) 4.0 trillion→(`20) 1.0 trillion→(`21) 8.6 trillion

A surge in M&A transactions in the form of mergers or acquisition of business between affiliates of same or similar industries within large business groups is attributable to companies seeking ways to enhance their competitiveness through business restructuring.

Meanwhile, the total number of M&A deals with non-affiliates increased by 56 (142→198 cases) and overall value was up by KRW 13.8 trillion (KRW 10.8→24.6 trillion).

* Total number of M&A deals among non-affiliates: (`17) 67 cases→(`18) 97 cases→(`19) 97 cases→(`20) 142 cases→(`21) 198 cases
* Total value of M&A deals among non-affiliates: (`17) 11.6 trillion→(`18) 3.8 trillion→(`19) 8.9 trillion→(`20) 10.8 trillion→(`21) 24.6 trillion

B. M&A where notifying parties were foreign firms

The total number of M&A deals* where notifying parties were foreign firms increased by 26 (133→159 cases, 19.5%↑) and value rose by KRW 110.4 trillion (KRW 174.1→284.5 trillion, 63.4%↑).

* Refers to merger deals between foreign-Korean firms, foreign-foreign firms)

The number of M&A where notifying parties were foreign firms dropped in 2020 due to COVID-19, but rebounded in 2021 thanks to large scale pharmaceutical and semiconductor M&A. The total number of M&A deals where foreign firms acquired Korean companies increased by 20 (28→49 cases) and recorded a 5-year high, but saw a decrease in value by KRW 2.5 trillion (KRW 9.0 trillion→6.5 trillion). The number of such transactions declined sharply (41→28 cases) in 2020, but rose significantly in 2021 and surpassed the number of cases in 2019.

* Number of cases: 41 cases(`17)→ 37 cases(`18)→ 41 cases(`19)→ 28 cases(`20)→ 49 cases(`21)

Korean firms garnered the most attention from US companies (8 cases, 16.3%), followed by firms based in Japan (7 cases, 14.3%) and China (6 cases, 12.2%). Furthermore, both the total number (105→110 cases) and value (KRW 165.1→278 trillion) of M&A between foreign firms increased.

3. Merger review trends by sector

When analyzing M&A by sector, the share of M&A deals in the manufacturing sector reached 31.1% (346 out of 1,113 cases), while the share of M&A deals in the services sector recorded 68.9% (767 out of 1,113 cases).

In the manufacturing sector, while M&A deals related to machinery and metal (80→92 cases, 15.0%↑), petrochemical and pharmaceutical (60→95 case, 58.3%↑), and electricity and electronics (54→90 cases, 66.7%↑) all increased, M&A related to non-metal minerals (20→17 cases, -15%) and food and beverages (19→18 cases, -5.3%) decreased.

In particular, eco-friendly trends have driven the growth of M&A related to renewable energy (36 cases), electric vehicles, lithium-ion/hydrogen batteries, and charging stations (12 cases).

Further, M&A activity flourished in the pharmaceutical (26 cases) and semiconductor (13 cases) industry as well.

In the services sector, M&A related to finance (189→241 cases, 27.5%↑), construction (39→54 cases, 38.4%↑), IT and broadcasting (73→105 cases, 43.8%↑), food and accommodation (10→14 cases, 40%↑) recorded an increase.

In particular, due to robust establishment of private equity funds (168 cases) and project financing investments (64 cases) in finance, construction and real estate development sectors, M&A deals in the form of establishment of a joint venture for the purpose of investment accounted for a significant share (232 cases out of 1,113 cases, 20.8%) of total cases.

Moreover, increased public awareness towards an eco-friendly environment and upcycling has spurred the growth of waste and sewage disposal M&A.

4. M&A by means and type

A. M&A by means

M&A in the form of acquisition of shares recorded the highest number (332 cases, 29.8%), followed by the establishment of a new company* (315 cases, 28.3%), mergers (219 cases, 19.7%), concurrent holding of an executive position (152 cases, 13.7%) and acquisition of business (95 cases, 8.5%), and was thus the same as that of last year.

* Refers to joint ventures established by different companies (Establishment of a company by a sole party or between affiliates are not subject to notification requirements)

Compared to the previous year, the number of M&A deals in the form of acquisition of business (96→95 cases) decreased, while M&A in the form of acquisition of shares (274→332 cases), concurrent holding of an executive position (100→152 cases), establishment of a new company (251→315 cases) and mergers (144→219 cases) all increased.

Mergers, which is a complete form of M&A, mostly took place among affiliates while incomplete form of M&A deals, such as acquisition of shares or establishment of a new company, mostly took place among non-affiliates.

B. M&A by type

When classifying M&A deals by type, transactions in the type of conglomerate mergers (672 cases, 60.4%) recorded the highest number, followed by horizontal mergers (377 cases, 33.9%) and vertical mergers (64 cases, 5.8%) and was thus the same as that of last year. All types of M&A deals increased compared to the previous year. However, while the share of horizontal mergers (28.1%→33.9%) rose, the shares of conglomerate and vertical mergers slightly declined. Among horizontal mergers, mergers between affiliates of similar or same industries (49→90 cases) and mergers in the form of establishment of joint ventures for investment purposes (39→75 cases) showed a notable increase.

5. Imposed sanctions

The KFTC carried out a in-depth review on 34 anti-competitive mergers and among them, imposed remedies on one case* that had anti-competitive concerns.
* KT Skylife’s acquisition of Hyundai HCN
** No. of cases in which remedies were imposed: (’17) 4 cases→ (’18) 3 cases→ (’19) 5 cases→ (’20) 3 cases→ (’21) 1 case

In addition, the KFTC imposed KRW 425 million fines on 30 cases that violated* requirements to notify mergers.

* Cases where merging parties fail to comply with pre-merger notification requirements or fail to notify mergers subject to post-merger notification within 30 days after the closing date of transaction.

(March 30, 2022 M&A Division, KFTC)