South Korea's mergers and acquisitions were all-time high, signaling a market recovery in the economy although cross-border deals are still low compared to other nations, according to the industry data.
According to the latest report done by Hyundai Research Institute, the size of local M&A market came to $106 billion in 2014, up 63 percent from the previous year.
Out of the total, the national M&A market stood at $77.1 billion while cross-border deals were $29.4 billion, which accounted for 27.6 percent of the total, up from 18.4 percent last year. The acquisition amount on average recorded $900 billion, up 38.6 percent from $700 billion in the previous year.
The reason behind the expansion is that major companies including Samsung and SK are pushing ahead of M&A deals in a bid to expand market share and to secure new growth engine ahead of economic recovery. Also, companies financially struggling are selling their minor assets to streamline their business.
M&A in South Korea was more active in different industries than in the same industries. Last year, M&A deals of the same industries dropped to 33.6 percent from 59.2 percent in 2009.
The report said Korea's M&A deals are still far behind the global trend. In the global M&A market, cross-border M&A deals continue to rise, accounting for 42.8 percent of the global deals.
Industry watchers said South Korea needs to push ahead with more cross-border deals because they help the firms obtain local sales base, secure advanced technologies and help to make forays into the advanced and emerging markets.
Plus, industry watchers said Korean companies are still too much focusing on traditional manufacturing businesses instead of acquiring new technologies or new businesses. Experts say Korean firms should boost monitoring the global M&A trends by industry and find out new business opportunities.
Globally, medicine and communications deals are expanding, accounting for 14.4 percent and 16.6 percent of the total. Still, in South Korea, manufacturing accounted for 21.7 percent of the total M&A.
"Korean companies should push ahead with M&A among the same industries with foreign firms to secure economy of scale. Also, the government should come up with support measures for the companies," said Chun Hae-young, a researcher at Hyundai Research Institute's industry strategic division.
"Also, Korean companies should be away from their traditional growth strategy and to fully capitalize on M&A to gain global competitiveness," she added.
