South Korea’s greatest conglomerates are stepping up restructuring efforts as competitors from China intensifies and US tariff threats loom.
Industrial teams with pursuits in metal, petrochemicals, retail, semiconductors and electrical automobile batteries have merged or offered off enterprise models to streamline operations and lift money.
The variety of mergers and acquisitions in South Korea elevated from 817 in 2023 to 930 final 12 months, with their worth rising from $50.8bn to $68.3bn, based on Dealogic.
Financiers and analysts stated most of the offers had been pushed by restructuring efforts that had been prone to speed up this 12 months as firms reply to US President Donald Trump’s protectionist trade policies and financial circumstances in South Korea deteriorate.
“The restructuring and M&A occurring in Korea is being pushed primarily by a defensive mindset because of the Korean economic system going through vital difficulties and headwinds,” stated Jaewoo Lee, managing accomplice of the Seoul workplace of US company legislation agency Ropes & Grey.
“These financial headwinds are resulting in a bearish outlook from Korean firms, with many in a batten-down-the-hatches sort of mode.”
SK Group, South Korea’s second-largest conglomerate by belongings, diminished the variety of its enterprise models from 716 to 660 within the first 9 months of 2024, promoting its automotive rental, speciality gasoline and polyurethane subsidiaries to personal fairness patrons.
“As the worldwide geopolitical setting modifications quick, we are attempting to decide on the correct companies and deal with them to be able to make investments extra in future development areas” together with synthetic intelligence, the group stated, including that its restructuring had helped enhance profitability.
Metal large Posco offered 45 of its unprofitable and non-core companies final 12 months “to spend money on development areas”, whereas chemicals-to-retail group Lotte stated it deliberate to promote non-core belongings together with abroad chemical models and a money machine enterprise “to enhance our monetary standing as home spending slumps and the population shrinks”.
Manufacturing jobs and analysis and growth funding sentiment are at a 12-year low, based on official information and a survey by the Korea Industrial Expertise Affiliation, whereas exports within the first two months of 2025 fell 4.7 per cent towards a 12 months earlier. Analysts stated the EV, petrochemicals and development sectors had been in a downturn, with firms struggling to draw traders to their bond gross sales.
South Korea’s central financial institution final week lower its projection for GDP development in 2025 to 1.5 per cent, down from a forecast of two.3 per cent a 12 months in the past. Governor Rhee Chang-yong cited Trump’s tariff threats whereas saying a quarter-percentage level lower to the benchmark rate of interest.
The US president has pledged to impose 25 per cent levies on metal and aluminium imports and hinted at duties on vehicles and chips, all key South Korean exports. He has additionally known as for rolling again subsidies for EV purchases and repealing laws on automotive emissions.
Park Ju-geun, head of company analysis group Leaders Index, stated SK Group particularly was wrestling with the fallout from disappointing EV gross sales in Europe and the US. Its portfolio contains EV battery maker SK On and chipmaker SK Hynix, which produces the high-bandwidth memory products utilized in Nvidia’s AI chips.
“SK’s restructuring is being pushed principally by a enterprise rationale, because it pivots to deal with the alternatives from AI whereas additionally mobilising cash from different models to rescue SK On,” stated Park.
He added that US tariffs would compound the issues attributable to a surge in Chinese language exports, which have hit South Korea’s metal, petrochemicals and ecommerce sectors.
Spooked by the rise of memory chip company CXMT and AI start-up DeepSeek, South Korean enterprise leaders are additionally fretting over their nation’s declining competitiveness towards China in essential applied sciences similar to semiconductors, South Korea’s main export.
South Korean expertise teams lagged their Chinese language counterparts in R&D spending by greater than $150bn in 2023, up from a spot of $9bn a decade earlier, based on the Federation of Korean Industries.
Final week, FKI chair Ryu Jin warned that “the golden time to revive our development engine is operating out” as he known as on lawmakers to supply extra help for the nation’s chip trade.
Wi Jong-hyun, enterprise professor at Chung-Ang College in Seoul, stated it was “worrisome” that Samsung, the nation’s largest enterprise group, was not among the many conglomerates engaged in restructuring. Its 22 associates suffered a mixed 23 per cent drop in market capitalisation final 12 months.
However others famous that not like extremely diversified conglomerates similar to SK Group, Samsung’s destiny relies upon largely on the efficiency of a single firm — its $266bn chips and smartphones enterprise Samsung Electronics — making the case for a wider group restructuring much less urgent.
Samsung Electronics stated it was increasing funding in development areas together with robots, AI and biotech. “We’re specializing in strengthening our elementary enterprise competitiveness from a long-term perspective,” the corporate stated in an announcement.
Lee of Ropes & Grey confused “it could be flawed to characterise” the newest wave of restructuring “as some sort of hearth sale”.
“Personal fairness patrons have loads of dry powder, and the variety of enticing companies approaching to the market remains to be comparatively restricted, all of which is driving competitors and first rate costs for sellers,” stated Lee.
“Firms are getting good valuations for the belongings they are placing in the marketplace, and they’re pulling offers when they don’t seem to be proud of the value,” he added. “They’re anxious, however they don’t seem to be determined.”
