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Sun, March 7, 2021 | 01:30
Markets
M&A market heating up amid long-lasting virus shock
Posted : 2021-01-19 17:15
Updated : 2021-01-19 17:50
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Getty Images Bank

By Lee Min-hyung

The nation's mergers and acquisitions (M&A) market is expected to heat up this year, as the ongoing COVID-19 pandemic continues to affect industries here, leading to major changes in the domestic business landscape.

The year-long coronavirus pandemic is driving a growing number of companies into a corner, and more firms are likely to be put up for sale this years after struggling to endure the longer-than-expected virus shock.

Korean Air's acquisition of Asiana Airlines will continue making headlines in the first half as Korea's biggest aviation deal. Late last year, Korean Air announced its plan to take over the nation's second-largest airline amid Asiana's ever-worsening profitability in the aftermath of COVID-19.

The aviation industry was hit particularly hard by the pandemic, as most market players' international flights have been de facto suspended since March last year when the rapid global spread of the coronavirus led to a dramatic drop in international travel.

The Fair Trade Commission has recently started reviewing whether the integration of the two airlines will harm the industry's fair trade ecosystem. It will take about four months for the watchdog to finish the review.

Korean Air also reported its acquisition plan to eight other overseas authorities in the United States, Japan, China and countries in the EU.

The planned integration of the two airlines is also expected to have a ripple effect on the nation's low cost carriers (LCC). If Korean Air's acquisition of Asiana Airlines is approved, the general expectation is that three LCCs ― Jin Air, Air Busan and Air Seoul ― will be merged into one entity. Jin Air is the LCC affiliate of Hanjin Group which owns Korean Air, while the two other LCCs belong to Asiana Airlines.

"The integration of the LCCs could be a good choice for the stable and sustainable growth of the industry at a time when most players continue to suffer from quarters-long deficits following the global COVID-19 shock," an official from the investment industry said.

"Even if nothing specific has been fixed over the move, restructuring the LCC industry has been frequently discussed even before the virus outbreak, as there are too many LCCs in the Korean market," the official said. As of the end of 2020, a total of seven LCCs have won licenses to operate here.

On the finance industry side, major financial conglomerates will keep seeking opportunities to expand their business portfolio through aggressive M&As.

Woori Financial Group remains most desperate to find mid-tier insurance and securities firms to acquire, as part of its strong desire to diversify its revenue streams in the non-banking sector. This is because insurance and securities businesses are two of the most profitable non-banking businesses for major financial firms.

Shinhan Financial Group, one of the top financial holding firms here along with KB Financial Group, is also gearing up for the acquisition of a non-life insurer this year and leaves open the possibility of establishing a digital insurer.

"Financial firms will intensify competition in the M&A market in 2021, as outlook remains murky over the potential growth of their traditional banking business amid prolonged low interest rates," a banking industry source said.


Emailmhlee@koreatimes.co.kr Article ListMore articles by this reporter









 
 
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