Korea's small and midsize corporations are actively pursuing mergers and acquisitions (M&A) to expand their businesses and strengthen competitiveness. Growth-strategy M&A aimed at entering new businesses and securing technology is increasing, while succession-driven M&A prompted by aging founders and a lack of heirs is also spreading.
◇ "Business diversification M&A" to secure growth engines
Kyungdong Navien, a living-environment energy company, signed a deal in Dec. last year to acquire smart home specialist COMMAX for about 32.8 billion won. Kyungdong Navien plans to link COMMAX's wall pads, door locks and CCTVs with its core products such as boilers and water heaters to build a differentiated smart home system.
Founded in 1968, COMMAX is a leading Korean smart home company that has supplied wall pads and door locks to more than 100 countries worldwide. Through this acquisition, Kyungdong Navien will expand its business scope into an integrated smart home system that connects boilers, water heaters, dehumidification and ventilation air purifiers, and the kitchen appliance brand "Navien Magic." The plan is to control not only temperature, ventilation and air quality, but also indoor security on a single platform.
Earlier, in May 2024, Kyungdong Navien acquired the gas range, electric range and electric oven business rights from SK Magic. It then added a 3D air hood and a ventilation air purifier to launch the kitchen appliance brand "Navien Magic," kicking off full-fledged portfolio diversification.
Mid-size drugmaker Ahngook Pharmaceutical is expanding its business through M&A. In Nov. last year, Ahngook Pharmaceutical acquired healthcare startup DimediKorea. DimediKorea, a company that develops and manufactures sleep-tech and lifestyle medical devices, owns the teeth-grinding mouthpiece "Goyo" and the silver care brand "Bodyrang." Ahngook Pharmaceutical is broadening its scope from a traditional pharma-centered business to healthcare.
In Oct. last year, Ahngook Pharmaceutical also set up a 20 billion won investment fund with Mirae Asset Capital. The fund invests in promising domestic and overseas venture companies in beauty, medical devices, and bio-healthcare. Chief Executive Park In-cheol of Ahngook Pharmaceutical said, "We will seize the rapidly changing bio-healthcare industry environment as an opportunity to strengthen sustainable growth and the foundation for new businesses."
◇ "Succession-type M&A" amid aging and lack of heirs
There are also more cases where M&A is used as a means of corporate succession beyond a growth strategy. Small and midsize corporations facing difficulties in business succession due to aging founders and the absence of heirs are seeking corporate continuity and employment stability through sales. The industry views this not as an "exit strategy" in terms of winding down, but as a "continuity strategy" of handing the company over to the next party.
Douzone Bizon, a mid-size IT company leading the domestic enterprise resource planning (ERP) market, is being sold to global private equity fund (PEF) EQT Partners. In Nov. last year, EQT Partners signed a stock purchase agreement (SPA) to acquire, for about 1.3 trillion won, 22.29% equity held by Chair Kim Yong-woo, the largest shareholder of Douzone Bizon, and 14.4% held by an affiliate of Shinhan Financial Group, the second-largest shareholder.
Douzone Bizon ranks second to Germany's SAP in Korea's ERP market. Chair Kim has two daughters, but neither has participated in the company's management and they are known not to have intent to take over. One of Kim's daughters is interested in the pet industry. Through personal company Douzone B&CT, in which Kim holds 94.39% equity, they are operating the pet theme park "Dog Forest" in Chuncheon, Gangwon Province.
Experts expect M&A among small and midsize corporations to become even more active. The analysis is that strategic M&A for securing technology and diversifying businesses, along with structural M&A to resolve succession issues, will expand at the same time.
According to the Ministry of SMEs and Startups' "2024 Survey on the Actual State of Small and Medium Enterprises," there are as many as 2.36 million small businesses led by chief executives age 60 or older. Among them, 675,000 corporations (28.6%) lack successors, making it difficult to ensure continuous management.
Kim Young-jin, head of the M&A Research Institute, said, "In the past, M&A was a strategy centered on large companies, but now it has become a core management tool for small and midsize corporations to address growth and continuity at the same time," adding, "Going forward, business-synergy M&A and succession-type M&A will be clearly distinguished, and the market will become more segmented."