Global M&A plunged in 2023, but South Korean companies adeptly managed macro risks, optimizing deals by shifting focus and taking decisive action over new ventures.

South Korean M&A volume fell 12.8% year-on-year (YoY) to USD 52.29bn from 833 deals, according to Mergermarket data, a more moderate decline compared with slumps of 19% and 30% in the wider Asia-Pacific and EMEA regions, respectively.

Celltion’s [KRX:068270] USD 10.8bn affiliate merger claimed the top spot for the year, propelling healthcare to the fore as the largest sector, comprising one-third of all deals.

Key takeaways

• Total M&A volume and count decreased 12.8% and 8.4% YoY, respectively.
• Healthcare and tech remain the top two sectors, although they swapped positions in 2023. With 65 deals totaling USD 16.53bn, healthcare was the top-performing sector, followed by tech with USD 7.3bn from 218 transactions.
• Private equity (PE) buyout deal volume dived 25.7% YoY, but exits surged 40% and 20% in terms of deal volume and count, respectively (2023 PE buyouts: USD 7.53bn, 42 deals; PE exits: USD 5.61bn, 25 deals).
• Outbound deal volume hit a decade low. Deal volume and count reversed 61% and 16% YoY, respectively (2023 outbound: USD 5.08bn, 122 deals).

Tender trender

Among the growing trends in 2023 was a rising number of controlling acquisitions via public tender offers, as evidenced in deals by SM Entertainment [KOSDAQ:041510], Osstem Implant, and Lutronic, as regulatory discussions to adopt a mandatory takeover code proceed. The number of Korean tender offers hit a record high last year, Mergermarket reported.

Conglomerates including SK and CJ, formerly taking the lead in big deals, were more discreet with large outlays while adopting a smaller scale of deals and divestments. SKC, LG, SK, Hotel Lotte and CJ made small non-core divestitures in 2023 amid accelerating carve-out momentum, as flagged by this news service.

The largest chaebol, Samsung, is also likely to swerve an earlier commitment to “significant M&A” this year by only sealing small domestic tie-ups, along with a USD 218m acquisition in the US.

Nevertheless, medium-to-large enterprises sitting on cash reserves are leveraging opportunistic timing for strategic deals, suggesting deal flow could increase in 2024.

To that end, cosmetics maker Amorepacific [KRX:090430] acquired skincare specialist COSRX for KRW 755bn (USD 559m), marking the largest deal in its history. SajoDaerim [KRX:003960], a canned tuna and food company, also made its biggest-ever acquisition, purchasing Ingredion Korea for USD 291m.

Border control

Despite tumbling deal volumes, actions were targeted, signifying maturing Korean investment strategies by mid-sized enterprises in diverse sectors.

Korea, which has again recorded the world’s lowest fertility rate, faces challenges from weakening domestic purchasing power and sluggish economic growth, driving corporates to look abroad.

Mirae Asset Financial Group has been betting on India since its brokerage service launched in 2018, and last year it became the first Korean financial group to acquire an Indian brokerage firm in a record USD 370m deal, the largest outbound investment of 2023.

In the US, the most favoured region for Koreans, Samyang Holdings [KRX:000070] bagged Verdant Specialty Chemicals for USD 257.8m, concluding a years-long search. Mergermarket previously reported that Samyang was hunting global targets to add high-end, specialty chemical products to its portfolio.

E-commerce giant Coupang [NYSE:CPNG], which was touted as a likely buyer after raising USD 4.55bn via its 2021 NYSE debut, landed Farfech, a UK luxury retailer, as its first foreign target.

Coupang and Samyang are set to pursue additional deals, according to dealmakers.

Shipbuilder Hanwha Ocean [KRX:042660] is also ready to test the M&A waters. It disclosed in November that it has allocated KRW 720bn (USD 550m) of capital from a rights issue for defence and offshore wind power procurements.

Morgan Stanley PE Asia and Hahn & Co rushed through exits in December, closing a strong year-end for PE departures.

Sponsors’ exit momentum should continue this year, with evolving exit strategies involving partial or secondary deals, as mirrored by IMM PE, which partially exited a growing industrial gas portfolio firm, yielding USD 850m.

Top five South Korean M&A deals in 2023

Source: Mergermarket, data correct as of 18 January 2024