By Kim Hyun-bin
Korean companies need to make more efforts to acquire overseas firms possessing advanced technologies, such as semiconductors, secondary batteries, artificial intelligence and biopharmaceuticals, rather than establishing more production bases abroad, according to a report by the Korea Chamber of Commerce and Industry (KCCI), Monday.
The business lobby stressed that mergers and acquisitions (M&As) should be active to enhance the technological competitiveness of domestic companies, in its report titled "Support Measures for Enhancing the Advanced Technology Competitiveness of Domestic Companies."
It argued M&As can facilitate corporate restructuring and entry into new growth industries, thereby increasing the growth potential of the domestic economy. They stated that M&As with foreign tech companies could be a key means of enhancing the advanced technological competitiveness of domestic companies.
Recently, the scale of M&A transactions in both domestic and international markets has contracted significantly. According to the SGI, the global M&A market volume in the first half of this year decreased by 39.5 percent compared to the previous year. The M&A market volume in the U.S. declined by 41.3 percent compared to the previous year, while domestic M&A transactions decreased by 41 percent.
The KCCI said there is a need to engage in international M&As to acquire foreign technologies. According to their report, domestic companies acquiring foreign companies can have significant technology transfer effects, leading to increased productivity. They can also provide opportunities for small and venture companies to grow into medium-sized enterprises by expanding into overseas markets through M&As with foreign companies.
However, domestic companies' overseas investments mainly focus on greenfield investments aimed at establishing their production bases or branches in other countries. Based on last year's data, greenfield investments accounted for 67 percent of domestic companies' overseas investments, which was higher than outbound M&A investments.
The report pointed out that the government needs to support domestic companies' outbound M&As. They particularly emphasized the need for support in discovering overseas companies for acquisition by venture startups unfamiliar with international M&As and providing legal and accounting advice. They also emphasized the importance of supporting post-merger activities such as organizational integration and operational costs.
The SGI emphasized the need to actively consider M&As for tech startups facing funding difficulties in the U.S. They considered it a good opportunity for domestic companies to acquire promising tech startups in the U.S. at relatively lower prices compared to the past.
"The decreased enterprise value due to the stagnation of the M&A market can be a good opportunity for investors. To take advantage of these opportunities, more proactive policy support is needed, which will contribute to the recovery of the M&A market and ultimately enhance the vitality of the domestic economy," said Kim Kyung-hoon, an official of the KCCI.