South Korea M&A Looks Steady and Strong Into ‘22

There’s a feeling of optimism for South Korea's mergers and acquisitions (M&A) market. After enjoying record levels of activity in 2021, deal flow in South Korea is expected to remain strong in 2022. Dealmakers are still feeling bullish on the ongoing economic recovery after the COVID-19 health pandemic took hold in 2020. Credit markets remain friendly as well, creating a very conducive environment for doing deals. 

During pandemic times, corporates have faced serious challenges. The transformation to digital, along with supply-chain management issues, made them realize that M&A is the best strategy for further growth. Private equity funds have also played a crucial role in the rising M&A market. They’ve accounted for almost half of the country’s total M&A volume and participated in more than half of the country’s top deals this year. Strategic investors will continue M&A growth into 2022. 

Rising valuations

It’s possible that competition for assets will cause a potential speedbump. As valuation multiples are reaching historic highs, investors are concerned about targets becoming overpriced in a competitive market. That’s why some are remaining more cautious as they gauge bold investments into companies that have market power, high growth potential or are advancing core technologies. These are some of the trends we cover in the SS&C Intralinks Deal Flow Predictor for Q1 2022, just out. (It’s our highly accurate six-month forecast of M&A activity based on global deals in preparation or beginning due diligence.)

Sectors to watch

Some sectors are standing out here: Technology, Manufacturing and Environment-related sectors are all worthy of note. Of course, Healthcare and Life Sciences will remain hot into next year. Strategic investors will actively seek M&A in these industries and financial investors will pursuit opportunities there as well.  

The initial public offering (IPO) market has been on fire. Strong investor participation helped to successfully close many blockbuster deals, largely from the Technology sector. This momentum will continue in 2022 as a series of megadeals from large corporations and unicorns are getting ready for listings on the IPO market.  

Conclusion

Overall, both dealmakers and investors in South Korea are optimistic about the coming year and confidence is high. Most of them expect even more M&A deals to come next year.  

Some factors to keep on the radar: South Korea’s central bank has already raised interest rates this year and will likely raise them further at least twice next year. The increased financing costs for transactions stemming from higher interest rates would not only have a negative effect on the M&A market but could also widen the gap between a seller’s price tag and their buyer’s willingness to pay which in turn might lead to delays of deals.