Greater volume than value
In 2017 the Korea Fair Trade Commission (KFTC) reviewed 668 reportable transactions, with an aggregate value of W509.4 trillion (around $475.5 billion); this is 22 more transactions than the 646 reviewed in 2016, but W84.2 trillion less than 2016’s aggregate value of W593.6 trillion.
Transactions involving foreign parties (i.e., a foreign acquirer buying a foreign target, or a foreign acquirer buying a Korean target) accounted for 154 transactions, with an aggregate transaction value of W455.6 trillion.
Increasing domestic activity
In domestic transactions, there was a rise in both reported transactions and aggregate transaction value. These deals centred on inter-affiliate transactions for corporate restructuring purposes, and non-affiliate transactions to harness capabilities for new growth. There was an increase in manufacturing sector deals in the electronics, petrochemicals and pharmaceuticals industries. There was also an increase in service sector deals in the wholesale/retail distribution, transportation distribution and information and communications and broadcasting industries.
Also, large-scale enterprise groups (with total assets exceeding W5 trillion) actively engaged in mergers to restructure and diversify their businesses. Notable among these transactions were Samsung Electronics’ acquisition of Harman International Industries and the Lotte Confectionary-Lotte Shopping spin-offs and merger.
The 154 foreign (global) deals reviewed in 2017 is marginally less than the 156 deals reviewed in 2016 (a 1.3% decrease). The 2017 aggregate value of W455.6 trillion is down from the 2016 total of W567.3 trillion (a 19.7% decrease). The aggregate value dropped more significantly than the number of deals because Korea saw fewer mega-deals in 2017. There were six mega-deals in 2016 but only four in 2017: Dow-Dupont (W152.3 trillion), AT&T-Time Warner (W97.2 trillion), Apollo-Lumileds (W23.2 trillion), and Pangea-Toshiba Memory (W20.3 trillion).
The number of deals involving foreign acquirers of Korean targets decreased from 47 in 2016 to 41 in 2017 (a 12.8% decrease), but the aggregate transaction value increased by 200% from W3.2 trillion to W9.6 trillion. This was due in large part to two mega-deals in the cosmetics and biomedical industries (Unilever-Carver Korea (W3.2 trillion) and Leguh Issuer-Hugel (W800 billion) and two transactions in the fourth industrial revolution technologies sphere (Khaki Holdings-Kakao Mobility (W500 billion) and Alipay-Kakao Pay (W200 billion).
The demographic of foreign acquirers of Korean targets included: EU (13), Japan (five) and China (two). There was a 50% rise in US acquirers (from eight in 2016 to 12 in 2017) and an 80% decrease in Chinese acquirers (from 10 in 2016 to two in 2017).
Out of the 668 cases reviewed in 2017, only four gave rise to anti- competitive concerns requiring remedies, two were foreign-to-foreign transactions, two were domestic.
Finally, administrative fines totalling more than W577 million were imposed in 28 cases for late reports or failures to report.
The KFTC announced that, going forward, it will continue to closely scrutinise transactions for anti-competitive effects and impose remedies, as appropriate; at the same time, the KFTC will accelerate review of deals having no anti-competitive concerns, to enable smooth implementation of business reorganisation plans.
In 2018 the KFTC is considering implementing measures to make the Korean merger control regime more effective, mainly through system improvements targeting transactions in the emerging industries sector.
One proposal is to amend merger reporting thresholds in the Monopoly Regulation and Fair Trade Act and the Enforcement Decree to include a new value threshold. This would address the fact that the Facebook-Whatsapp merger was not reportable in Korea because Whatsapp’s Korean turnover was too low to satisfy the Korean local nexus reporting threshold.
Another proposal is amending the merger review guidelines to include consideration of new types of anti-competitive effects that may arise in the emerging industries sector. These include anti- competitive effects that may arise in horizontal mergers between companies possessing big data, or vertical mergers involving big data and other products.
A final consideration is amendments that would expedite the review of transactions which cause little anti-competitive concern, to support investments or acquisitions by large-scale companies in innovation venture companies. For example, to vitalise investments made through private equity funds, the KFTC has submitted draft amendment legislation to the National Assembly providing for merger reporting exemptions for funds established for the sole purpose of raising capital.
However, given the level of discussion still needed to drive these initiatives forward, it remains to be seen whether measures will be implemented within this year, as announced.