South Korean M&A value in 2022 nosedived 38.5% year-on-year (YoY), slumping to USD 57bn across 806 deals compared with USD 92.7bn from 712 deals in 2021, according to Dealogic data. Both private-equity (PE) and inbound deal value halved.
Activity in the fourth quarter was hit by the looming specter of recession in 2023, recording its lowest quarterly figure of the year (USD 11.1bn from 124 deals), and marking YoY falls of 70% and 46% in deal value and count, respectively.
Only M&A deal volume offered up some hope, with the number of deals rising 13.12% YoY, as strategic dealmaking remained resilient on the back of business portfolio adjustments.
Key takeaways
- 2022 M&A deal count gained 13.12% YoY because of increased domestic activity. There were 720 domestic deals worth USD 51.22bn vs 656 for USD 81.64bn in 2021.
- Inbound activity totaled USD 5.8bn across 56 deals vs USD 11bn from 56 in 2021.
- Outbound activity reached USD 13.45bn from 125 deals, sliding 37% and 8% by value and count, respectively (USD 21.35bn via 136 deals in 2021).
- Technology and healthcare continued to hold the top two spots in 2022 despite declining deal value.
- Transportation, real estate, and finance made it into the top-five sector list, having been absent in 2021.
PE pain
PE buyouts and exits collapsed, as soaring inflation beset markets, with deal value halving to USD 9bn across 35 transactions compared with USD 18bn from 38 transactions in 2021.
Despite this, MBK Partners in December announced a USD 1.9bn buyout of Medit, a 3D dental scanner tech firm, from Unison Capital, representing the largest PE deal of the year.
Conglomerates’ ties with financial sponsors proved one of the major drivers of those PE deals that were able to get across the line, as companies sought to secure investment resources for future tech and growth engines.
In pre-IPO rounds to bolster expansion, SK Group’s battery-making unit, SK on, and Hanwha Solutions’ [KRX:009830] advanced material unit attracted USD 627m and USD 514m, respectively, of PE funding. SK E&S also netted USD 572m from KKR to step up its drive to become a global provider of clean energy solutions. Hahn & Co bagged SKC’s [KRX:011790] non-core industrial material unit for USD 1.3bn, in addition to two small bolt-ons: Mychef (USD 60.8m) and Samho Environment Technology (USD 37.4m).
Hyundai Motor Group’s logistics unit invited Carlyle, its third-largest shareholder, to diversify its shareholding by selling a partial stake at USD 510m.
Bearish investors and financing challenges could hamper dealmaking in 1H23, according to two sector advisors. However, corporates are expected to engage in portfolio reviews more thoroughly, they maintain, thus providing non-core divestment opportunities.
Healthy interest
South Korea’s technology and healthcare sectors saw most of the action in 2022. Major healthcare deals include a USD 1.06bn deal between Sanofi and ABL Bio, while Hanmi Science and Hanmi International agreed a USD 112m share-swap merger.
There were also signs of outbound reach for healthcare assets. A SD Biosensor consortium agreed to buy Meridian Bioscience [NASDAQ:VIVO] for USD 1.56bn. This represented the second-biggest overseas deal following Korea’s largest web portal, Naver [KRX:035420], bidding USD 1.62bn in October for Poshmark [NASDAQ:POSH], a California-based second-hand goods platform.
LG Chem [KRX:051910] acquired the US’ AVEO Pharmaceuticals [NASDAQ:AVEO] for USD 635m, while Lotte Group added New York-headquartered Bristol-Myers Squibb’s drug-manufacturing facility for USD 160m, as both doubled down on healthcare. In October, Lotte announced its largest-ever takeover, paying USD 1.9bn for local battery materials producer Iljin Materials [KRX:020150]. The deal is slated to complete in February. Lotte has vowed for additional M&A or JV to complete its value chain in the battery material business.
Electric vehicle-related technology and materials, healthcare, energy, and environmental sectors such as recycling are expected to remain attractive target businesses, say the sector advisors, despite economic headwinds.
Samsung set to swoop
Korea’s largest M&A move of 2022 came from Samsung. The country’s largest chaebol shelled out USD 2.3bn in January for a 49.99% stake in Samsung Bioepis, a biotech joint venture held by US partner Biogen [NASDAQ: BIBB], to take full ownership and scale the business.
In October, Lee Jae-Yong was promoted to chairman of flagship entity Samsung Electronics [KRX: 005930], after serving 10 years as vice chairman, in a bid to ensure stable management amid market volatility.
The market is now awaiting further mega, global M&A activity from Samsung in the tech space after it pledged to pursue more deals and tighten its sector-leading grip.
