SOUTH KOREA Trends and Developments Contributed by: Yun Seok Jang, Yong Hee Kim, Gajin Choi, Dae Kun Jang and Seung Hyun Dennis Cho, Shin & Kim
Shin & Kim LLC D-Tower (D2) 17 Jongno 3-gil Jongno-gu Seoul 03155 Korea
Tel: +82 2 316 4114 Fax: +82 2 756 6226 Email: shinkim@shinkim.com Web: www.shinkim.com
Introduction Korea’s mergers and acquisitions (M&A) market saw a downturn in 2024 and the number of com- pleted deals also declined sharply, marking the lowest activity level in recent years. Korea was not immune from being affected by high inter- est rates, economic uncertainty and geopoliti- cal tensions. While a significant pick-up in M&A activities in Korea is currently not expected given the general economic outlook, it is noted that the M&A market is expected to slowly rebound in 2025, driven by various factors. Korean conglomerates have been accelerating efforts to divest non-core assets – particularly in industries such as chemical, oil refining and energy, rechargeable batteries, semiconductors, biopharmaceuticals and shipbuilding, shipping and logistics – to enhance financial strength and focus on future growth sectors. Also anticipated are increased M&A activities driven by techno- logical advancements and strategic realign- ments, which are reshaping the corporate land- scape in Korea, prompting companies to pursue M&A as a means to boost competitiveness and achieve transformation objectives. Private equity firms, with significant cash reserves and grow- ing influence in the M&A market, will continue to
play a key role in corporate restructuring, capi- talising on opportunities arising from conglomer- ate divestitures as increasingly seen from 2024 onwards. In terms of market players, domestic private equity firms (PEFs) will continue to play a signifi- cant role as borrowers in the Korean M&A mar- ket, along with Korean conglomerates as strate- gic buyers of businesses. On the lenders’ side, Korean domestic banks and securities houses are likely to remain as the most active lender group in the acquisition finance sector. How- ever, overseas private equity firms and interna- tional banks are showing increased interest in filling the liquidity gap created by the domestic financial institutions taking a more conservative approach to underwriting new loans. The chal- lenge for these institutions will be to find effec- tive means to comply with and navigate through various regulatory requirements, including those found under the foreign exchange regulations, in order to provide credit to borrowers in Korea. Financing Structure For acquisition loans, generally a special pur- pose vehicle (SPV) is newly established by a sponsor as the borrower of the acquisition loan
431 CHAMBERS.COM
Powered by FlippingBook