Seven out of 10 Korea’s major companies plan to expand M&As and investments for new growth such as blockchain-relate, metaverse, and green economy and up supply capacity, a survey by the Maeil Business Newspaper found.

The Maeil Business Newspaper conducted a survey on chief financial officers and financial directors of 43 major companies in Korea to ask about their spending plans for next year. According to the poll, 55.8 percent said they would focus on expanding business scope by searching for M&A opportunities, and 16.3 percent would increase capital expenditures to strengthen capacity.

Another 18.6 percent plan to use their excess fund to improve their finance by, for instance, reducing debts, instead of capital expenditure.

Most companies feel the necessity of increasing investments to survive in the rapidly changing business landscape, although almost all of them, 97.7 percent, expect the interest rate to go up next year.

The finding suggests M&A activity in Korea could be strong next year as well after the last two record-breaking years.

According to the Maeil Business Newspaper, local M&A deals had already blown past the 50 trillion won ($42.5 billion) mark as of the end of September, surpassing the previous record-high of 45.3 trillion won in full 2019.

The abundant cash from the improved earnings is expected to fuel M&A activities next year. More than half of the respondents said they will use their own excess cash to finance their businesses.

A third of respondents predicted that private equity funds (PEFs) would continue to lead the M&A boom in 2022. According to the Global Private Equity Report 2021, PEFs amassed a record $3.3 trillion of unspent capital by mid-2021, growing 2.75 times from a decade ago.

As the environment, social and governance (ESG) factors have grown in importance to investors, 61.9 percent agreed on the need for buyouts to strengthen their ESG portfolio.

That has been boosting the demand for companies engaging in environment-related businesses. The country’s No.2 waste treatment company EMK is valued at 1 trillion won, KG ETS’ environment and energy business at 700 billion won and eco-friendly bio diesel maker Daekyung Oil and Transportation at 500 billion won.

Seven out of 10 companies, 69.8 percent, said rate hikes would be the biggest threat to their finance operation next year. It was followed by the risk from inflation with 48.8 percent, profitability deterioration 27.9 percent and economic downturn 20.9 percent.

By Kim Myung-hwan, Park Chang-young and Choi Mira

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