[M&A Written Hanwha 70-Year History] ① 'Hwangoltaltae' for the Third Leap

Turning Deficits into Surpluses through Acquisitions
Hanyang Chemical, Daehan Life, Q-Cell, etc.
Rapid Growth through Major M&A Deals
Acquisition of Marine Defense Leader Daewoo Shipbuilding
Integrated Land, Sea, and Air Defense Systems Established
Defense, Solar Power, and Aerospace Businesses
Built as Core Growth Engines
Accelerating Energy New Business Restructuring
Focus and Selection... Maximizing Corporate Value

Editor's Note
Hanwha Group, which will celebrate its 70th anniversary on October 9, is preparing for a new leap forward through continuous innovation and aggressive mergers and acquisitions (M&A). Starting from explosives, Hanwha Group has built its core growth engines in chemicals, distribution, and finance, and further expanded into solar energy, defense, and aerospace. Recently, with the push to acquire Daewoo Shipbuilding & Marine Engineering, its status in the business world is also changing. Following founder Kim Jong-hee, Chairman Kim Seung-yeon has led the group for over 40 years, revealing his competitive spirit in every crisis and growing the group. Succession work is expected to accelerate around his three sons, Kim Dong-kwan, Kim Dong-won, and Kim Dong-sun. This article reviews Hanwha Group’s growth history and secrets, as well as future governance restructuring, marking its 70th anniversary.

Chairman Seung-yeon Kim of Hanwha Group, inaugurated on August 1, 1981. Source=Hanwha Group

[Asia Economy Reporter Choi Seoyoon] Hanwha Group is undergoing a radical transformation based on aggressive mergers and acquisitions (M&A) akin to corporate revival and group restructuring. Despite external shocks such as the second oil shock in the 1980s and the global economic crisis in the 2000s, it has steadily grown to become the 7th largest conglomerate in Korea. Through active overseas expansion, Hanwha has risen as a global leading company and is accelerating group restructuring by boldly investing in next-generation energy new businesses. By establishing defense, solar energy, and aerospace as core growth engines, Hanwha is entering a turning point to leap from the 7th largest conglomerate to the ‘Lockheed Martin of East Asia.’

According to industry sources on the 28th, Hanwha Group plans to complete the acquisition of Daewoo Shipbuilding & Marine Engineering this year, marking its 70th anniversary. The plan is to combine Daewoo Shipbuilding’s ship design and production capabilities, a marine defense powerhouse, with the group’s main ground defense business to secure new growth engines. The acquisition of Daewoo Shipbuilding is significant as it completes an ‘integrated land, sea, and air defense system’ covering existing space and ground defense sectors.

Industry analysts say that the decision to acquire Daewoo Shipbuilding, which posted an operating loss of about 1.7 trillion KRW last year, for around 2 trillion KRW was possible because of Hanwha Group’s past successful M&A experiences.

The Secret to Leapfrog Growth: ‘M&A’... Turning Deficit Companies into Profit Makers

Hanwha Group has achieved remarkable growth through major M&As since Chairman Kim Seung-yeon took office. Immediately after his inauguration in 1982, Kim pushed through the acquisition of Hanyang Chemical and Korea Dow Chemical (now Hanwha Solutions Chemical, Advanced Materials division), which had a combined deficit of 50 billion KRW. Despite opposition from group executives, he persevered in negotiations and turned the companies profitable within a year. His bet was successful by comprehensively assessing the business potential in petrochemicals and the timing of international economic recovery.

The reason the group shifted from traditional heavy and chemical industries to financial, distribution, and leisure sectors as growth pillars was also due to M&A. To develop finance as a new growth engine, Kim acquired Daehan Life Insurance in 2002, which had accumulated losses of 3 trillion KRW at the time. To eliminate post-M&A aftereffects, he resigned from all CEO positions in other affiliates and devoted himself full-time and without pay as Daehan Life’s CEO for two years. Ultimately, the company turned profitable within six years. Earlier, he entered the leisure business by acquiring Jeong-A Group in 1985 and launched Hanwha Galleria by acquiring Hanyang Distribution Department Store in 1986 and Dongyang Department Store in 2000.

In 2012, Kim acquired Q-Cells, the world’s largest solar cell manufacturer based in Germany, achieving vertical integration and economies of scale in the solar business. This was based on the judgment that the solar market would enter a full growth phase after 2014. Thanks to this, Hanwha has recently been spotlighted as a major beneficiary of the U.S. Inflation Reduction Act (IRA). In 2014, Hanwha also acquired Samsung’s defense and petrochemical divisions entirely, strengthening its core business competitiveness based on selection and concentration as Korea’s largest defense company. Based on aggressive M&A-driven business restructuring and profit maximization, the group’s assets have grown from 754.8 billion KRW in 1981, when Kim took office, to 229 trillion KRW, a 303-fold increase, and sales have increased more than 60 times from 1.1 trillion KRW during the same period.

Business Restructuring into an Energy Company... Another Change through ‘Selection and Concentration’

Currently, Hanwha Group is accelerating under the leadership of Kim Dong-kwan, Vice Chairman of Hanwha Solutions. As the future growth engines of the group, defense and solar energy are led by Vice Chairman Kim, and the Daewoo Shipbuilding & Marine Engineering M&A, which is key to strengthening competitiveness in defense and eco-friendly energy businesses, is expected to gain momentum.

The selection and concentration strategy is also continuing in Hanwha Solutions’ recent business restructuring. To strengthen the solar business, the Galleria division will be spun off through a split-off, and part of the advanced materials division will be spun off through a split-off. The existing five business divisions will be reduced to three: Q-Cells (solar), Chemical (basic materials), and Insight (Korean solar development projects, etc.), aiming to maximize corporate value centered on energy and materials.

Professor Lee Kyung-mook of Seoul National University’s Business Administration Department said, “Behind Hanwha Group’s growth is Chairman Kim Seung-yeon’s animalistic instinct and business sense for M&A, but more importantly, his outstanding ability to normalize acquired companies and increase corporate value was crucial. Based on an organizational culture that values ‘trust and loyalty,’ the post-merger integration (PMI) process has been excellently managed, enabling effective chemical bonding between organizations.”