Will the paused clock of the business world M&A start ticking again?

SK's 'Surprise Big Deal', Major M&A Four Years After Samsung's 2016 Harman Acquisition

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyewon] SK Hynix has pulled off the largest 'surprise big deal' in domestic history, drawing attention to whether the M&A clock of major conglomerates, which had been stalled, will start ticking again. Amid a surge in global M&A opportunities due to the direct impact of COVID-19, there is speculation that various M&As will gain momentum as Korean companies have secured 'ammunition' by maximizing internal reserves to proactively respond to the crisis.

On the 20th, SK Hynix signed a contract to acquire Intel's NAND business unit in the United States for $9 billion (approximately 10.31 trillion KRW), marking the most significant M&A news in the business world in four years since Samsung Electronics acquired Harman for $8 billion in 2016. It is reported that SK Group, including SK Hynix, conducted multiple internal simulations to secure funding for this large-scale deal. An SK official stated, "There is about a year left until the first payment, and we plan to use our own cash reserves first. After next year, we will establish a comprehensive funding plan considering improvements in the memory semiconductor market."

With SK Group, led by SK Hynix, firing the starting gun for M&A amid the COVID-19 crisis, attention is focused on the possibility that other major conglomerates, which had been weighing the timing of M&A, may accelerate their decision-making. Samsung Electronics has shown little M&A activity since acquiring Harman for over 9 trillion KRW in 2016, due to prolonged judicial risks surrounding Vice Chairman Lee Jae-yong, which increased uncertainty.

Hyundai Motor Group Chairman Chung Euisun, who replaced the chairman after 20 years and officially began third-generation management, is highly likely to play the M&A card in the Fourth Industrial Revolution sectors, including companies with promising autonomous driving technologies. However, so far, the group appears to prefer strategic investments in promising startups rather than large-scale M&As.

Among LG Group’s recent major overseas M&As, a notable case is LG Electronics’ acquisition of the automotive lighting company ZKW for over 1 trillion KRW in 2018. Besides this, LG Group has continued various M&As ranging from smaller deals worth around 10 billion KRW (such as LG Household & Health Care’s acquisition of Evameru) to larger ones worth about 800 billion KRW (such as LG Uplus’s acquisition of CJ Hello). Notably, LG Group has secured nearly 4 trillion KRW this year alone through the sale of LCD polarizer businesses by affiliates, the sale of the Beijing Twin Towers in China, and the sale of LG CNS shares, leaving ample room for additional M&A activity.