Samil Publishes M&A Trend Report Since COVID-19
[Asia Economy Reporter Lee Seon-ae] Due to various social changes triggered by COVID-19, in the endemic era (periodic outbreaks of infectious diseases), companies that actively embrace the MZ generation (Millennials + Generation Z) through flexible organizational cultures such as remote work, and that can respond flexibly to global supply chain changes through vertical supply chain integration, as well as companies that swiftly adapt to regulatory changes in each country and gain social trust through ESG (Environment, Social, Governance) practices, are expected to receive relatively much higher valuations in the M&A market. Similarly, companies with such competitiveness are expected to emerge as prominent buyers in the M&A market.
On the 12th, Samil PwC analyzed in its recently published report, "New Trends in the M&A Market Following Major Social Changes After COVID-19," that new trends in the M&A market are being triggered by changes occurring in five major areas (▲Space and Workforce ▲Supply Chain ▲Consumer Behavior ▲Regulation ▲ESG). The report also presented new perspectives and response strategies that stakeholders active in the M&A market should reflect when preparing and executing actual deals.
Companies with Flexible Organizational Cultures such as Remote Work and Pursuing ESG Will Also Have Higher Valuations
Samil PwC stated in the report, "The COVID-19 pandemic triggered extensive and fundamental changes in individual and group behavior, corporate activities, and social norms," adding, "These changes have had a profound impact on the decision-making of customers and consumers as well as corporate operations, and many important factors that were previously taken for granted must now be discarded and newly considered in the future M&A market."
The report noted, "Just as the 9/11 terrorist attacks changed global transportation and security systems, and the 2003 SARS outbreak changed Chinese consumers' shopping methods leading to the rapid growth of Chinese e-commerce companies, crises accelerate change," emphasizing, "Since the social and economic shocks of COVID-19 are expected to continue for years, all stakeholders in the M&A market?including buyers, targets, dealmakers, and investors?must approach M&A with a different start and attitude than before."
First, the rapid spread of remote work due to COVID-19 and the resulting changes in organizational culture are expected to act as significant variables in the corporate acquisition integration process. In particular, while work environment and organizational culture were not major factors influencing M&A success in the past, the emergence of the so-called MZ generation is expected to make these core variables determining M&A success in the future. Especially, if organizational culture does not align after M&A, it can lead to mass departures of key personnel, so understanding and managing workforce and organization must be considered from the early stages of M&A.
Following COVID-19, with the onset of the new Cold War era marked by US-China conflicts and the Ukraine war, extensive regulatory changes are expected in each country, emerging as variables to consider in the M&A market. As the world becomes more bloc-oriented and IT and big tech companies?the biggest beneficiaries of the pandemic?grow rapidly, regulations such as strengthened personal data protection and antitrust measures against big tech are emerging as M&A risks in each country. Additionally, Samil PwC emphasized in the report that dealmakers must approach social demands for ESG, shareholder value, and investor protection more cautiously.
Tak Jung-soo, partner leading the Samil PwC deal platform, said, "Historically, major crises have accelerated rapid changes. For example, SARS in 2003 brought significant changes to consumer shopping methods, providing an opportunity for Chinese e-commerce companies to grow rapidly," emphasizing, "The social trends changed after the COVID-19 pandemic will not slow down their pace in the future." He added, "Stakeholders participating in the M&A market must actively respond with more meticulous and complex solutions from perspectives different from the conventional views regarding key issues such as organizational culture, supply chain, consumers, regulation, and ESG."
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