South Korean M&A staged Q4 comeback

An active fourth quarter and strong economic fundamentals signal a busy year ahead for South Korean dealmaking

South Korean M&A suffered a setback in 2020 as the impact of the COVID-19 pandemic rippled across the globe. The crisis prompted many companies to put their M&A plans on hold, while waiting for a more stable dealmaking climate to return. This caution among dealmakers is reflected in the yearly figures: 2020 deal volume trailed 2019 by 15%, while deal value recorded a 19% fall.

Yet there is evidence that South Korean M&A activity is starting to make a comeback. A resurgence of activity in the final quarter of 2020 saw deal value more than double on Q3’s total, reaching US$19.6 billion. Similarly, Q4 deal volume increased by 24% compared to the previous quarter.

Transportation and I&C top tables

The largest deal of 2020—Korean Air Lines’ announced acquisition of a majority stake in domestic rival Asiana Airlines for US$8.4 billion—took place in the final quarter of the year. The global airline industry has been hard-hit amid the pandemic, with stay-at-home orders and border closures sending shockwaves across the industry. The deal represents an attempt by the Korean airline group to navigate its way out of the current crisis and toward long-term growth.

While Korean Air Lines’ takeover of Asiana Airlines resulted in the transportation sector achieving the  highest deal value across the year, it was the industrial and chemicals sector that attracted the highest number of deals in the fourth quarter. Following consistent dealmaking activity throughout the year, the sector posted the highest deal volume across all sectors in 2020, as well as the second-highest value.

Much of this activity took place within the waste management sector, with three significant sales taking place over the course of the year. The Korean waste management sector proved resilient in 2020. The increasing cost of waste disposal and increased waste amidst the COVID-19 pandemic has pushed up revenues for local firms, making them attractive targets for PE firms sourcing growth in a challenging climate.

The largest of these deals—also the largest to take place within the sector in 2020—was SK Engineering’s US$885 million bid for EMC Holdings from Singaporean PE firm Affirma Capital, announced in September. The South Korean construction company reportedly beat off competition from international private equity houses to secure the deal, following a competitive auction process.

Earlier in the year, KKR acquired medical waste treatment firm ESG Co. Ltd. and a 77.8% stake in industrial waste management company ESG Cheongwon Co. Ltd. from Hong Kong-based private equity firm Anchor Equity Partners. The US$719 million deal—the first the US buyout firm has carried out in the country for two years—follows the launch of its US$1.3 billion Global Impact Fund in February, which aims to focus on sectors providing solutions to environmental or social issues.

Macquarie’s US$271 million sale of a majority stake in industrial waste disposal firm Keontec to E&F Private Equity, announced in June, is another sign of growing interest in South Korea’s waste management industry.

Inbound M&A slows, but PE remains active

Inbound M&A activity targeting South Korean firms fell sharply in 2020 as COVID-19 caused global dealmakers to put their overseas plans on hold. The total number of inbound cross-border deals decreased by 44% compared to 2019—to the lowest annual volume since 2009. Deal value suffered a similar fate, with US$4.8 billion of deals making up less than a third of 2019’s total. As a result, domestic activity took up the majority of Korean deal activity—seven out of the top ten deals of the year took place between local firms.

While international corporations appeared to turn away from overseas deals, global private equity firms remained active in the South Korean market. The largest inbound PE deal of the year was Hong-Kong based Affinity Equity Partners Ltd. and Baring Private Equity Asia’s announcement of a deal to buy a 7.33% stake in South Korean banking group Shinhan Financial Group for US$974 million.

US buyout firms were particularly active, as seen in KKR’s previously mentioned investments in the waste management industry. Another notable deal was TPG Capital’s agreement to acquire a minority stake in digital bank Kakao Bank for US$664 million. The San Francisco-based buyout firm has made previous investments in high-growth companies such as Uber, Spotify and Baidu Financial.


While it has been a challenging year for dealmakers across the globe, several positive indicators point to a resurgence in South Korean dealmaking over the coming year. The economic outlook is bright, with GDP predicted to grow 3.2% in 2021, paving the way for a return to pre COVID-19 levels of M&A activity.

On top of these strong economic fundamentals, South Korean companies are reportedly sitting on record levels of cash reserves, which could provide a further boost to 2021 dealmaking. According to data firm FnGuide, companies listed on the Korea Exchange held a record US$493.3 billion in cash reserves at the end of September 2020. The transition to a post-pandemic economy could provide good opportunities to put this money to work through M&A.

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