Foreign capital aggressively pursued investment activities as the sharp decline in the won’s value enabled them to acquire domestic assets at bargain prices.
Foreign capital market ‘big players’ swept major deals this year, driving growth in the domestic mergers and acquisitions (M&A) market.
While domestic companies focused on liquidating non-core assets and domestic private equity fund (PEF) operators maintained conservative investment approaches amid comprehensive regulatory pressure, foreign capital aggressively pursued investment activities as the sharp decline in the won’s value enabled them to acquire domestic assets at bargain prices.
According to industry sources on Dec. 31 last year, among the top 10 management control transactions by value this year (based on announcement), deals by foreign companies and PEF operators totaled approximately 10.673 trillion won (approximately $7.41 billion). This represents an increase of nearly 45% compared to the same period last year (7.451 trillion won).
The largest transaction was French industrial gas company Air Liquide’s acquisition of DIG Air Gas (formerly Daesung Industrial Gas) in August, valued at approximately 4.6 trillion won. After a fierce competition between infrastructure-focused foreign PEF operators Stonepeak and Brookfield, Air Liquide secured victory in the acquisition battle.
Analysts suggest that as Chinese investment contracted and won weakness solidified, Korea’s investment appeal grew from the perspective of overseas capital. From early this year through Dec. 26 last year, the annual average won-to-dollar exchange rate based on closing prices was 1,422.03 won, the lowest level in history, falling below the 1998 level (1,394.9 won) immediately following the foreign exchange crisis.
Foreign capital also consecutively acquired assets classified as non-core by conglomerates but possessing excellent growth potential and profitability. Representative examples include KKR’s acquisition of SK Ecoplant’s environmental business (1.78 trillion won), UAE’s Taqa’s acquisition of GS Inima (1.677 trillion won), and Brookfield’s acquisition of SK Airplus’s carbon business (1.3 trillion won).
Beyond ‘trillion-won’ deals, there was a clear trend of expanding investment scope to promising mid-sized companies. Global PEF operators KKR and Blackstone surprised the market by betting 733 billion won and 800 billion won respectively on acquisitions of cosmetics container manufacturer Samhwa and beauty franchise company Juno Hair.
A senior official from a foreign investment bank (IB) stated, “Prestigious overseas operators who were previously quiet in Korea have recently shown increased interest in Korea,” adding, “Infrastructure-focused operators are entering to explore opportunities in private equity (PE), or pension funds previously recognized only as limited partners (LPs) are seeking direct investment opportunities.”
