Companies Seeking Mergers and Acquisitions

“We are considering some 40 companies as possible candidates for mergers and acquisitions,” said Lee Woong-ryul, chairman of the Kolon Group.

“We’ll take over a 200-billion-won worth pharmaceutical company,” said Kim Yoon, chairman of Samyang.

The recent buzzword among CEOs is mergers and acquisitions. Over the past month alone, seven CEOs expressed their will to mount takeover bids, which is a rarity.

Some of them just mentioned their long-term plans for takeovers in broader terms, while others, including Kim, released the size and industry of their planned takeover bids.

This is totally different from the existing way in which executives secretly push ahead with takeover bids for fear of possible leakages of information or “sabotage” from competitors.

Over the past month, mergers and acquisitions have been a common topic at CEO press conferences.

Choi Heon-ki, president of Dongbu Express, said on April 2, “We will become the leader of the home-delivery industry by 2010 through mergers and acquisitions with small-sized home-delivery companies.”

Lee held his first press conference in three years on April 11, on the occasion of Kolon’s 50th anniversary, and said that he would seek a second leap for the company through mergers and acquisitions.

KEPCO President Lee Won-geol and Samsung Corp. CEO Ji Seong-ha said that they would seek takeovers on April 18.

Also, LG Chem CEO Kim Ban-seok, DuPont Korea CEO Won Chul-woo, and the aforementioned Kim said officially that they would pursue takeovers in press conferences and media interviews.

The purposes for their planned takeovers vary.

For Lee Woong-ryul at Kolon and Lee Won-geol at KEPCO, it is “to secure future growth.”

The two companies share the same reason because both are suffering from slow growth.

Relatively small-sized companies turn to mergers and acquisitions to increase their size.

Won Chul-woo at DuPont Korea, which posted $600 million in sales last year, said, “It is to grow DuPont Korea to be commensurate with the size of Korea’s economy.”

Kim Ban-seok at LG Chem predicted, “Mergers and acquisitions as a tool to increase size and globalization of companies is a survival strategy for the petrochemical industry.”

Experts say that the remarkable increase in companies seeking a takeover indicates the changing management environment of Korea.

Lee Han-deuk, a researcher at LG Economic Research Institute, said, “In the past, Korean companies set up an affiliate when entering a new industry, which took less time and had high chances of success. But now such an approach takes longer and has a lower chance of success because of the existing companies. So, they prefer mergers and acquisitions.”

Another recent feature related to takeovers is that companies do not confine possible candidates for takeover to Korean companies.

Kang Won, a senior researcher at Samsung Economic Research Institute, said, “They cannot raise their global market share by seeking mergers with Korean companies only. That’s why they are considering overseas firms as possible candidates. By merging with overseas companies, they can secure a new competency that Korean companies do not have.”

buddy@donga.com