Difficulty Finding 'New Owner' for 'Court-Managed' Properties... Corporate Bankruptcies Also Up 40%

12 Restructured Companies Undergoing M&A Procedures This Year with Zero Deals
Buyer’s Market Continues... "Attractiveness of Listings Declines"
Over 40% Surge in Companies Abandoning Restructuring to File for Bankruptcy

Acquisition and merger (M&A) deals involving companies undergoing corporate rehabilitation procedures (formerly known as court receivership) are struggling to find 'new owners.' Although 12 deals have already been listed this year, no contract successes have been reported yet. The number of companies giving up on recovery and filing for bankruptcy has increased by 40% compared to last year.

According to the investment banking (IB) industry on the 29th, construction company Shinil is currently pursuing an M&A process following court approval. The sale is being managed by EY Han Young Accounting Corporation, and letters of intent to acquire will be accepted until the 2nd of next month. The process is being conducted through a so-called 'stalking horse' method, a public competitive bidding system with a right of first refusal. Once ranked 57th in construction capability evaluation (contract ranking), Shinil filed for corporate rehabilitation in May last year due to the downturn in the construction market. It is known for its apartment brand 'Happy Tree.' Shinil was also listed as an M&A deal in December last year but failed to find a suitable buyer and was withdrawn. This is its second attempt.

Cold Market Response, Zero Deal Closures

The market response to M&A deals of companies under rehabilitation has been cold recently. According to the court, as of the 28th, a total of 12 companies under rehabilitation have announced M&A deals this year. The same period last year saw 10 companies. None of these have successfully closed a contract yet. Many, like Shinil, have experienced failed bids. Daewoo Winia Group affiliates Winia, Winia Electronics Manufacturing, and Winia Electronics, which are undergoing rehabilitation procedures, are also seeking buyers but face tough conditions. In the case of the listed company Winia, it recently faced delisting risks due to a 'disclaimer of opinion' from auditors, which is a cause for delisting.

Kim Sang-man, an M&A expert at the law firm Hwawoo, said, "Currently, the overall M&A market is in a buyer's market where sellers far outnumber buyers. In a situation where deals involving healthy companies are not active, it is difficult for already damaged rehabilitation companies to attract market interest." He added, "The lack of attractive rehabilitation companies with decent remaining assets or sound operations is also fueling the market's neglect."

Companies Giving Up Recovery Surge 40%

The number of companies giving up on recovery and filing for bankruptcy is also on the rise. According to the Supreme Court's monthly statistics report, the number of corporate bankruptcy filings from January to February was 288, a 40.4% increase compared to 205 filings during the same period last year. This exceeds the number of rehabilitation filings (263). The 'dead cross' state, where bankruptcies outnumber rehabilitations, began last year. In 2023, there were 1,657 corporate bankruptcy filings and 1,602 rehabilitation filings. This dead cross was the first since the court began compiling statistics and has worsened this year.

Recently, the market has been spreading the 'April crisis theory,' predicting that the real estate project financing (PF) crisis will intensify after the April general elections. Concerns about a domino effect of bankruptcies centered on the construction industry are emerging. Regarding this, Jung Kyung-soo, head of the M&A Center at Samil PwC, said, "Ultimately, the problems that have been festering will burst after the general elections. If distressed PF projects or companies can be properly managed to mitigate the shock, the M&A market could also be revitalized." He added, "The domestic M&A market is gradually recovering, and if uncertainties about interest rate cuts are resolved, the situation is expected to improve significantly from the second half of the year."