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 items to streamline operations and lift money.
The variety of mergers and acquisitions in South Korea elevated from 817 in 2023 to 930 final yr, with their worth rising from $50.8bn to $68.3bn, in keeping with Dealogic.
Financiers and analysts mentioned lots of the offers have been pushed by restructuring efforts that have been prone to speed up this yr as firms reply to US President Donald Trump’s protectionist commerce insurance policies and financial situations in South Korea deteriorate.
“The restructuring and M&A going on in Korea is being driven primarily by a defensive mindset as a result of the Korean economy facing significant difficulties and headwinds,” mentioned Jaewoo Lee, managing companion of the Seoul workplace of US company regulation agency Ropes & Grey.
“These economic headwinds are leading to a bearish outlook from Korean companies, with many in a batten-down-the-hatches kind of mode.”
SK Group, South Korea’s second-largest conglomerate by belongings, lowered the variety of its enterprise items from 716 to 660 within the first 9 months of 2024, promoting its automobile rental, speciality gasoline and polyurethane subsidiaries to non-public fairness consumers.
“As the global geopolitical environment changes fast, we are trying to choose the right businesses and focus on them in order to invest more in future growth areas” together with synthetic intelligence, the group mentioned, including that its restructuring had helped enhance profitability.
Metal large Posco offered 45 of its unprofitable and non-core companies final yr “to invest in growth areas”, whereas chemicals-to-retail group Lotte mentioned it deliberate to promote non-core belongings together with abroad chemical items and a money machine enterprise “to improve our financial status as domestic spending slumps and the population shrinks”.
Manufacturing jobs and analysis and growth funding sentiment are at a 12-year low, in keeping with official information and a survey by the Korea Industrial Know-how Affiliation, whereas exports within the first two months of 2025 fell 4.7 per cent towards a yr earlier. Analysts mentioned the EV, petrochemicals and development sectors have been in a downturn, with firms struggling to draw traders to their bond gross sales.
South Korea’s central financial institution final week minimize its projection for GDP development in 2025 to 1.5 per cent, down from a forecast of two.3 per cent a yr in the past. Governor Rhee Chang-yong cited Trump’s tariff threats whereas asserting a quarter-percentage level minimize 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 automobiles and chips, all key South Korean exports. He has additionally known as for rolling again subsidies for EV purchases and repealing laws on automobile emissions.
Park Ju-geun, head of company analysis group Leaders Index, mentioned SK Group specifically was wrestling with the fallout from disappointing EV gross sales in Europe and the US. Its portfolio consists of EV battery maker SK On and chipmaker SK Hynix, which produces the high-bandwidth reminiscence merchandise utilized in Nvidia’s AI chips.
“SK’s restructuring is being driven principally by a business rationale, as it pivots to focus on the opportunities from AI while also mobilising money from other units to rescue SK On,” mentioned Park.
He added that US tariffs would compound the issues brought on by a surge in Chinese language exports, which have hit South Korea’s metal, petrochemicals and ecommerce sectors.
Spooked by the rise of reminiscence chip firm CXMT and AI start-up DeepSeek, South Korean enterprise leaders are additionally fretting over their nation’s declining competitiveness towards China in vital applied sciences equivalent to semiconductors, South Korea’s main export.
South Korean know-how 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, in keeping with the Federation of Korean Industries.
Final week, FKI chair Ryu Jin warned that “the golden time to revive our growth engine is running 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, mentioned 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 yr.
However others famous that not like extremely diversified conglomerates equivalent 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 mentioned it was increasing funding in development areas together with robots, AI and biotech. “We are focusing on strengthening our fundamental business competitiveness from a long-term perspective,” the corporate mentioned in an announcement.
Lee of Ropes & Grey pressured “it would be wrong to characterise” the newest wave of restructuring “as some kind of fire sale”.
“Private equity buyers have plenty of dry powder, and the number of attractive businesses coming on to the market is still relatively limited, all of which is driving competition and decent prices for sellers,” mentioned Lee.
“Companies are getting good valuations for the assets they are putting on the market, and they are pulling deals when they are not happy with the price,” he added. “They are anxious, but they are not desperate.”
