By Kang Seung-woo
The number of 30 conglomerates' affiliates broke the 1,000 mark for the first time last year, an online portal reported Monday.
There are escalating concerns over the conglomerates’ wayward expansion in areas that have nothing to do with their core businesses.
According to Chaebul.com, an online portal that specializes in information concerning large businesses and family-owned conglomerates, the number of affiliates owned by the nation’s top 30 companies by assets reached 1,069 as of the end of last year, up 78 from the previous year.
The number of their units stood at 702in 2005, followed by 764 in 2006, 847 in 2007 and 969 in 2008 before recording 991 in 2009, meaning that the number gained 150 percent in the five-year period.
The nation’s top 10 conglomerates, to no surprise, led the increase, as they accounted for 51.2 percent of the surge after their affiliates grew from 350 to 538 in the cited period.
Observers attribute the sharp jump to a flurry of mergers and acquisitions (M&As) on the back of President Lee Myung-bak’s business-friendly policy after the government abolished regulations that prevented major firms from expanding their operations into some business fields in 2009.
SK Holdings and Lotte Group were found to have been most active in sprawling expansion among the 30 companies.
SK, headed by Chairman Chey Tae-won, had 54 affiliates at the end of 2005, but the nation’s No. 3 conglomerate added 30 to its arsenal to hold the most affiliates locally, while Lotte also saw its number of subsidiaries increase by 30 to 74 during the same span.
As for Lotte, chaired by Shin Kyuk-ho, the nation’s fifth-largest firm, performed aggressive expansions last year, adding 16 and slashing just two.
LS Group, which was spun off from LG Group in 2003, added 28 in five years and GS Group, another spinoff from LG, gained 27.
Hyosung Group, LG, Kumho Asiana Group and Hanwha Group also added more than 20 affiliates.
On the other hand, there were several corporations which reduced their subsidiaries.
The number of Youngpoong’s affiliates dropped from 26 to 24 and others including Shinsegae Group and Dongkuk Steel each saw their lower units decrease by one.
Due to the conglomerates’ overexpansion, smaller companies were found to feel overwhelmed.
A recent survey by the Korea Federation of Small and Medium Business (Kbiz), a large number of smaller firms said business sentiment remains low because they have lost customers after larger companies have muscled in on the areas where their smaller counterparts used to operate.
“The survey showed that most smaller firms have barely maintained their business or suffered losses,” said an official of Kbiz.
“The government needs to come up with measures to restrict conglomerates’ reckless expansion.”