Samsung Electronics recently created a mergers and acquisitions (M&A) team through an organizational reshuffle. The aim is to acquire domestic and overseas corporations with technology in a rapidly evolving tech environment and in competition with global big tech, and grow through those deals.
M&A is the most powerful means for corporations to secure technology quickly and accelerate growth. M&A is a core strategy of open innovation and is also important to the startup ecosystem. It serves as an exit (recovery of invested capital) and a springboard to leap to the next stage through integration with large corporations that have capital strength.
Yoo Hyo-sang, head of the Unicorn Management and Economy Research Institute, said in an interview with ChosunBiz on the 9th, "In the era of the technology war, M&A between large corporations and tech startups needs to be more active," adding, "With the creation of Samsung Electronics' M&A team, structural changes should occur across the domestic startup ecosystem."
Yoo served as head of planning and CEO at groups including Samsung, Tongyang, and ILJIN Group, and as an MBA professor and graduate school of business dean at Dongguk University, Sookmyung Women's University, and CHA University of Medicine and Science; he is an economic expert and researcher who has analyzed the startup and innovation ecosystem.
His book published this year, Paradox of the economy, was selected as a Sejong Book for the fourth time following Unicorn, Judgment and choice, and A leader's misjudgment. It is rare for a single author to be selected for Sejong Books four times.
Sejong Books is a program prepared by the Korea Publication Industry Promotion Agency under the Ministry of Culture, Sports and Tourism to encourage domestic publishers to publish quality books. For books published over the past year, experts in each field select only whether they are "good books," without considering sales volume.
◇"Startup ecosystem needs activation of open innovation"
Yoo noted that while Samsung operates a corporate venture capital (CVC) arm and venture investment organizations, it has now created a separate M&A team.
"The symbolism is significant. Samsung has sent a message to the market that it will actively acquire corporations going forward. It means a shift from growth centered on internal R&D to a dynamic system that actively absorbs external technologies and businesses. It signals a full-scale push for open innovation and, further, the rapid expansion of a convergence ecosystem between large corporations and startups."
Throughout the interview, Yoo emphasized the consolidation between large corporations and promising tech startups and small and midsize corporations. This aligns with the "converged ecosystem plan connecting large corporations, small and midsize corporations, startups, and small merchants" recently mentioned by Minister Han Seong-sook of the Ministry of SMEs and Startups.
Yoo said, "Korea's industry has a one-sided cooperation structure between large corporations and small and midsize corporations," adding, "A structure needs to be established in which startups with new technologies join and create innovation."
Yoo also said, "In the domestic startup ecosystem, the structure in which financial investors (FI) invest and exit through an initial public offering (IPO) has been overemphasized," adding, "FIs ultimately aim to realize profits, so their speed in judging technology or strategic synergies is inevitably slow."
He continued, "Strategic investors (SI) like Samsung are specialized corporations in their fields, so they can quickly assess the necessary technologies and decide on investment or acquisition," adding, "For startups to draw a real growth curve, they need to take both the market and technology through equity partnerships with SIs, strategic investment, and M&A."
Yoo noted that in the United States there are many cases in which tech startups exit straight through M&A without investment, emphasizing that Korea also needs a change in mood.
◇"In an aging era, M&A, not business succession, is the survival solution"
Yoo said that with Korea facing aging and changes in corporate structures, M&A could be the solution.
He said, "As aging deepens, the issue of business succession at small and midsize and mid-tier corporations will grow," adding, "In reality, many corporations lack successors. In this situation, M&A can be a core strategy to secure corporate continuity."
He added, "Going forward, the more important question will not be 'business succession or M&A,' but 'how to reorganize industrial competitiveness through M&A.'"
Lastly, Yoo projected that external instability, including a prolonged period of a strong dollar-won exchange rate, will act as an important variable in corporate strategy.
He said, "The won-dollar exchange rate has surpassed 1,450 won, and there is a strong possibility it will be stuck in the 1,400-won range," adding, "Corporate strategies need a complete overhaul. Large corporations can hedge currency risk, but for small and midsize corporations it is virtually impossible." A strong dollar-won rate raises energy and raw material prices and makes corporate management difficult.
He emphasized, "External variables such as U.S. tariff pressure and U.S.-China tensions are overlapping," adding, "It is dangerous to complacently think, as in the past, that the exchange rate will someday fall again."