The Korea Fair Trade Commission (the "KFTC") released its half-yearly report on merger control activities during the first half of 2021 (the "Report").¹  The KFTC's report indicates some noticeable trends across certain industries, which are expected to continue through 2021, including the KFTC's continued focus on the so-called Fourth Industrial Revolution.  Companies doing business in Korea should continue to closely monitor these trends and the potential impacts of the newly added size-of-transaction test threshold, which is part of a broader set of amendments to Korea's Monopoly Regulation and Fair Trade Law (the "FTL") and is set to take effect from December 2021.

An Overall Increase in Reported Transactions

According to the Report, the KFTC reviewed a total of 489 mergers in H1 2021 that had a total transaction value of about KRW 221 trillion.  This was an increase in both the number of cases reviewed and the total transaction value from the same period in the previous year.  The KFTC reviewed 65 more cases than in H1 2020 (15.3% increase) and the total transaction value increased by KRW 72.4 trillion compared to H1 2020 (48.7% increase).

The following chart is a breakdown of mergers reviewed during the first half of the year by the KFTC for the past three years.
   

Out of all transactions that were reported in H1 2021, 422 cases (86.3%) were reported by Korean companies (i.e., domestic-to-domestic and outbound), with a total value of KRW 30.2 trillion (13.7%).  Notably, there was a surge in mergers by Korean companies during the past year, particularly conglomerate mergers (i.e., mergers between companies that operate in unrelated business activities), as a means to enter or invest in new industries, and thereby diversify their revenue models and secure mechanisms for future growth.  We expect this trend to continue, along with an increase in the number of mergers between Korean companies that also require notifications in foreign jurisdictions.

In addition, while the number of outbound mergers by Korean companies in H1 2021 was cut in half to seven cases compared to H1 2020, the total transaction value jumped by nearly five times mainly due to a large-scale transaction in the semiconductor industry (i.e., SK Hynix's KRW 10 trillion acquisition of Intel's NAND flash and solid-state drive (SSD) businesses).

While the number of mergers reported by foreign companies (i.e., inbound and foreign-to-foreign) remained roughly the same compared to the same period in the previous year (67 cases in H1 2021 and 68 cases in H1 2020), the aggregate deal value surged by 47% to KRW 190.9 trillion in H1 2021, returning to pre-COVID-19 levels since H1 2020 when the aggregate deal value plunged to KRW 130 trillion.  This was largely due to the increase in the transaction values of large-scale foreign-to-foreign mergers, three of which had transaction values exceeding KRW 20 trillion.

Trends Appear Across Certain Industries in H1 2021

By industry sector of the target company, there were 155 cases in the manufacturing sector, representing 31.7% of all cases, and 334 cases in the service sector, representing 68.3% of all cases.  In the manufacturing sector, the number of mergers in the electric and electronics industry increased by 44 cases compared to H1 2020 (91.3% increase) and the machinery and metals industry by 46 cases compared to H1 2020 (27.8% increase).  The number of merger cases decreased in the non-metallic minerals industry to six cases (50% decrease compared to H1 2020) and the food and beverages industry to seven cases (30% decrease compared to H1 2020).

The surge in the number of mergers reviewed by the KFTC in the electric and electronics industry was driven by mergers involving the Fourth Industrial Revolution and semiconductors (seven cases), and new and renewable energy sources (19 cases); this appeared to be in response to the Korean government's environment-friendly policies.  In particular, the KFTC seems to be paying closer attention to mergers in the semiconductor industry, as suggested by its decision to issue a separate public notice earlier this year on the review status of several semiconductor-related merger cases.²

In the service sector, there was a significant increase in the number of mergers reviewed by the KFTC in the information and communications technology ("ICT") industry (increased by 48.6% to 52 cases compared to H1 2020) and the transportation and logistics industry (increased by 76.9% to 23 cases compared to H1 2020).  Many of the mergers in the ICT industry involved gaming companies (11 cases), indicating the growing interest in the content industry in Korea.  In the transportation and logistics industry, there was a significant number of cases involving foreign and domestic shipping companies, as many companies in the industry underwent restructuring.

Top Ten Global Mergers Reviewed by KFTC in H1 2021

The KFTC's Report includes the following summary of the top ten high-value mergers reported to the KFTC by global companies in H1 2021.  Kim & Chang represented nine of the top ten cases.