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By Anna J. Park
The boom in the nation's mergers and acquisitions (M&A) market seen over the past several years is expected to continue this year, as more than seven out of 10 local corporate leaders were found to have aggressive corporate acquisition plans.
According to EY Korea's 2022 CEO Outlook Survey released on Monday ― which surveyed 2,000 CEOs of global corporations ― 72 percent of the CEOs of Korean companies said they will pursue M&As proactively in order to propel corporate growth. That is the highest level seen in the past 10 years and is also up by 23 percentage points compared to the previous survey conducted in 2021.
The positive response among CEOs of domestic companies is much higher than either the global average of 59 percent or the Asia-Pacific regional average of 54 percent. This shows that CEOs of Korean firms have a particularly stronger interest in M&As as a means to expand their businesses.
Specifically, 43 percent of the surveyed CEOs of local companies responded that they're planning a bolt-on acquisition, referring to the purchase of smaller companies in the same industry sectors of their firms to increase strategic value. Also, 36 percent of the CEOs of domestic firms said they're interested in M&A deals that would boost management capacities, while nine percent said they're looking to acquire promising startups.
Also, 32 percent of the local CEOs opted to acquire companies based in Korea, followed by 25 percent choosing China, 14 percent selecting Germany, 12 percent choosing the U.S. and eight percent looking at India. These results are diverse compared to the responses by the heads of global firms, of which 46 percent opted for the U.S., followed by 16 percent choosing the U.K., 15 percent selecting China, 13 percent preferring India and nine percent favoring Germany.
The forecast of the sectors that are expected to witness the most frequent M&A deals this year is also notable. While the heads of local firms pointed to manufacturing, financial services and cars as being the three most active sectors in terms of M&As this year, global corporations' CEOs choose the communication, technology and healthcare industries.
"While the M&A markets in both Korea and around the world enjoyed a record boom last year, companies are expected to focus on consolidating their recently acquired assets. At the same time, additional M&As are also forecast to be pursued actively among them, as they aim to secure growth potential," said Choi Jae-won, managing partner at EY Parthenon Korea.
"While the competition in the M&A market is expected to continue heating up, CEOs are urged to seek acquisition strategies based on long-term growth and value, rather than going after short-term gains."
The global M&A market posted an all-time high both in the number of deals and in the amount of transactions. Last year alone, a total of 5,359 M&A deals were signed, amounting to $5.4 trillion. In Korea, the M&A market also expanded by 21 percent year-on-year to $47.7 billion.
