South Korea Lacks Cross-Border Tech M&As

Jun 07, 2018

M&A (Merger & Acquisition) of tech startups is seen as a major driving force of a business as we enter Industry 4.0 generation. On the other hand, it is shown that South Korea greatly lacks number of foreign M&As.
Korea International Trade Association’s (KITA) Institute for International Trade (IIT, Director Shin Seung-kwan) analyzed investment information data from S&P, which is an American credit rating agency, and announced ‘Tech and Startup Global M&A Trend’ report.
According to its report, number of tech M&A, which indicates M&A of ICT (Information Communication Technology) companies, was responsible for 16.2% of entire M&As that had taken place globally in 2017. This is the highest value in the past 10 years. Tech M&A is utilized more than R&D to develop and innovate current technologies.
Number of tech M&As for South Korea jumped from 114 in 2013 to 197 in 2017, which is 72.8% increase. However, most of these M&As were between South Korean companies and only few of them were cross-border tech M&As. This trend is different from the U.S. and EU (European Union) and even China who are showing dynamic looks globally.

South Korea Lacks Cross-Border Tech M&As

In 2017, number of cross-border M&As for South Korea was only 31. Percentage of cross-border M&As to number of entire tech M&As for South Korea is only 15.7% and it is far lower than that of the U.S. (822, 31.8%), EU (639, 45.4%), and China (84, 21.3%). Increase rate of cross-border M&As for South Korea (24.0%) is also lower than that of the U.S. (32.2%), EU (40.1%), and China (110.0%).
Percentage of deep-tech M&As, which indicates M&As in areas such as IoT( Internet of Things), Big Data, AI (Artificial Intelligence), robot, and blockchain, to number of entire tech M&As for South Korea is higher than that of China.
However, South Korea also lacked initiatives in acquiring foreign technologies even in deep-tech areas. South Korean companies are also not targets that are appealing enough to be acquired by foreign companies. Although number of deep-tech M&As (based on acquisition) for South Korea is the third highest followed by the U.S and EU, most of these M&As are between domestic companies. Number of cross-border deep-tech M&As for South Korea was only 2 in 2017 and it is lower than that of China (12) and Japan (6).
“As number of market demands for innovative technologies such as AI and blockchain is rising rapidly, it is expected that M&As between tech startups are going to become more active.” said Kim Bo-kyung who work as a researcher for IIT. “Just like the U.S. and China who actively carry out tech M&As globally, we also must promote competitive tech startups and form an ecosystem with virtuous cycles through acceleration of global M&As.”
Staff Reporter Park, Jungeun | jepark@etnews.com

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