COVID-19 brings hiatus in M&A calendar in Korea

2020.03.27 14:14:53 | 2020.03.27 14:15:44

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South Korea’s mergers and acquisitions market has gone on a recess to wait out until the coronvarius pandemic passes.

According to data compiled by Maeil Business Newspaper, M&A deals in Korea in the first quarter ended March this year totaled 3 trillion won ($2.5 billion), the lowest since 2013 when the newspaper began compiling such data. Compared to the first quarter last year, the volume plunged 55 percent. The total includes only the M&A deals worth 5 billion won or more, made by Korean companies both at home and abroad.

Before the arrival of COVID-19, this year was expected to be a bumper year.

A number of big deals have been pushed back with only three deals, including Jeju Air’s acquisition of fellow budget carrier Eastar Jet at 54.5 billion won, made this month to bring the total at 127.7 billion won.

Daewoo Mirae Asset Global Investment has postponed its deal process to acquire 15 hotels in the U.S. from China`s Angbang Insurance Group. The asset manager initially planned to complete the deal by the end of this month but the two parties agreed to push back the deal closing by three months, according to an industry source on Thursday.

The asset management cited world-wide travel suspension orders due to the coronavirus pandemic that have banned its officials from visiting the U.S. for due diligence as a main reason to delay its hotel acquisition process. But market analysts suspect the company is having difficulty in securing funds from investors who worry about the plunging value of hotels grappling with low occupancy rates due to COVID-19 outbreaks taking a heavy toll on the hospitality industry world-wide.

The sale of Young Toys, Korea’s leading toymaker, was put on hold after the strongest buyer candidate education service MiraeN has decided to sit on its decision amid growing economic uncertainty due to the virus outbreaks.

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The M&A market is expected to contract further in the following quarters as market uncertainties continue to grow on coronavirus spreading widely across the world.

Kiwoom Securities recently called off its plan of buying a securities company in Vietnam, even after carrying out a due diligence and completing price negotiation.

E-Mart, the country’s largest supermarket chain, also has temporarily stopped its negotiation over its stake investment in Mesh Korea, the operator of popular local food delivery app Vroong.

Instead of seeking for M&As, companies are bolstering their cashable assets against uncertainties.

E-Mart sold off an idle land, which has been reserved as a site for a mega shopping mall, to Taeyoung Engineering & Construction consortium at 815.8 billion won on Wednesday.

Private equity funds are also opting to concentrate on managing the existing investment portfolio, rather than seeking new purchases. “It is hard to justify new investment when the uncertainties are so high,” said a PEF official.

Some market experts, however, anticipate that the M&A would recover rapidly if the coronavirus crisis eases within the near future, given the record-high liquidity in M&A market. According to the Financial Supervisory Service, investment pledged into PEFs reached 84.3 trillion won at the end of last year, up 9.8 trillion won from a year earlier.

By Kim Gi-chul, Han Woo-ram, Park Jae-young, and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]