Few large corporate sell-offs made here over the past decade or so have been without one sort of controversy or another.
In most cases of problematic cross-border M&A, Koreans have blamed foreign buyers for what they viewed as unethical business practices, such as targeting only short-term speculative gains or stealing hard-won technology by exploiting the sellers' weak positions. Foreigners have countered that Koreans didn't know the world of corporate acquisition and changed their minds before and after the crisis.
It is against such a controversial backdrop that Daewoo Engineering and Construction, the nation's third-largest builder, has been put on the block. Initial signs do not appear encouraging, though.
Above all, there are wide differences in the views between the Kumho Asiana Group, the parent company of Daewoo E&C, and outside analysts as well as its labor union in their evaluations of the two foreign funds ― Middle East-based Jabez Partners and U.S.-headquartered TR America Consortium ― which have recently been selected as the preferred bidders.
Kumho Asiana says both of the private equity funds are sound investors with sufficient financial resources and will guide the builder to a stable growth track. The organized labor and more than a few market analysts, however, raise serious questions on not just these companies' funding capacity but even their corporate identities, particularly citing the Middle Eastern organization's capitalization remains at a mere 50 million won ($43,000), and their common recalcitrance to even deposit money as a guarantee to their commitment.
We are not in a position to discern their contrasting arguments. Granted, the unionists' claims may reflect in part their displeasure with the possibility of drastic restructuring but the company should not dismiss neutral and objective views of market watchers.
If the foreign bidders are as good as the management says, it would not only help Kumho Asiana to get out of a serious financial pinch but also remove one more burden on the national economy as well. In case the would-be buyers prove to be irresponsible speculators, however, it would only add one more disgraceful incident to international M&A history.
This is why the firm's creditors and regulators should not leave the sell-off proceeding to Kumho Asiana alone. Come to think of it, the seed of misfortune was sown when the transport-logistics chaebol took over Daewoo E&C, one of Korea's best construction firms in terms of corporate performance and cutting-edge technology in the plant and nuclear power generation, which exceeded the funding capacity of the group, forcing it to offer an excessive buy-back option of its shares.
Therefore, we think the best way is to let go of some of the family-controlled conglomerates, which made irrational decisions out of greed that caused them to go beyond their means, while signaling to others that the era of ``TBTF (too-big-to-fail)" has passed. If that is difficult in reality, related parties should restart the bidding from the ground up after clarifying all suspicions surrounding the existing bidders, through active intervention of its main creditor, the Korea Development Bank.
Regulatory authorities for their part should waste no more time to come up with legal and institutional devices to prevent the recurrence of M&A-related problems, such as violations of agreements or unwarranted technology theft. It is long past time for Korea to stop bungling deals and even accepting foreign criticisms about xenophobia even in the world of business.