M&As forecast to hit all-time high this year

Mergers and acquisitions in South Korea are expected to reach a record high this year as companies may try to streamline operations and find new sources of growth amid a prolonged business slump, experts said Wednesday.

According to data by Daewoo Securities Co., the value of local M&As reached a record 77 trillion won last year, with the number of deals also hitting a record 427.

"The government's policy that stresses corporate reform and economic revival will serve as a catalyst for the realignment via M&As," said Daewoo researcher Yoo Myung-gan.

"The amount of money involved in merger deals this year may break last year's record, given big-name companies on the market," he added.

One of the major candidates for M&A deals is Coway Co., South Korea's top water purification maker.

MBK Partners, a local private equity fund, is pushing to sell part of its stake in Woongjin Coway Co., with the price tag to range from 2 to 3 trillion won.

Though the bidding process has been delayed due to a breakup in the consortium between prospective bidder CJ Group and China's Haier, it is expected to resume next month.

ING Life Korea is also on the block as South Korean private equity fund MBK Partners Ltd. is looking to sell it for a maximum of 2.5 trillion won after taking it over in 2013 from the Netherlands-based ING Group.

Conglomerates' efforts to consolidate affiliates for streamlining are also expected to vitalize M&A activities further this year, according to market watchers. 

"Since several years before, big business groups such as SK and Samsung have rushed to M&As as well as intra-group consolidations as a way to boost their overall competitiveness," NH Investment & Securities official Cheong Young-chae said.

"Such a trend is expected to continue through this year as corporations need to sell off non-core parts to cut costs and to maximize efficiency," he added.

Among high-profile intra-group mergers include the deal between Cheil Industries Inc. and Samsung C&T Corporation, and between Hyundai Steel and Hyundai Hysco Co.

It remains to be seen, however, how many such cases will be completed in a way to satisfy both sides, experts said.

"Too many entities up for sale at this time of bleak economic circumstances could cause mismatches between the buyside and the sellside in price terms," said Kim Sang-jo, a professor at Seoul's Hansung University. (Yonhap)