Korea's M&A deals contract 67% in Q3 amid higher borrowing costs

South Korea’s M&A deals in the third quarter recorded 7 trillion won ($4.8 billion) in total—equivalent to a third of the same quarter last year, after the soaring borrowing cost has refrained companies and private equity firms from investment for future growth.

According to the league table for the third quarter compiled by Maeil Business Newspaper on Thursday, a total of 7.11 trillion won was traded for corporate acquisitions, down 67 percent from 21.4 trillion won in the same period last year. In terms of cumulative figures for the first nine months of the year, the amount reached 26.27 trillion won—around half of 50 trillion won in the same period a year ago.

Of all the deals, only two exceeded 1 trillion won – SD Biosensor’s 1.99 trillion won deal to buy U.S.-located Meridian Bioscience and SK materials airplus’1 trillion won deal to sell its industrial gas production facility to Canadian firm Brookfield.

During the same period last year, six deals were over 1 trillion won as firms, such as Netmarble and DTR Automotive, made big bets in the robust market.

M&A activities dwindled mainly because PEFs, which deal about 80 percent of domestic M&As, stayed away from M&As in the quarter, according to investment banking sources. “Institutional investors are reluctant to take part in PEF deals,” said Park Dae-joon, Samil PWC partner in the deal advisory division. “Headwinds will likely hang over in the market until the end of the fourth quarter because investors are uneasy with lingering market uncertainty.” Park expects recovery in the M&A market in the first quarter of next year.

Foreign investment banks topped the rankings for M&A financial advisory in the doldrums as they led domestic firms’ buyout deals of overseas firms. Rothchild & Co. ranked first, recording a total value of 2.42 trillion won, followed by Piper Sandler with 1.99 trillion won. They both advised SD Biosensor’s buyout of Meridian Bioscience. Credit Suisse Securities ranked third with 1.77 trillion won for its advisory service to SK materials airplus for selling its industrial gas production facility to Brookfield. It is currently leading Hanwha’s buyout deal of Daewoo Shipbuilding & Marine Engineering, which is expected to be completed by the end of this year.

As to accounting advisory, Samil PwC kept its No.1 position for three consecutive quarters. Kim & Chang took the largest chunk for legal advisory service, participating in deals worth 7.66 trillion won.

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