This study delineates the institutional improvements that need to be made to the corporate merger and acquisition (M&A) market in Korea in order to establish M&A as a healthy tool of management, minimize the possible repercussions and monopolistic implications of M&A and enhance the market transparency. M&A is still in a nascent stage in Korea, due to the immaturity of corporations in general, the exclusive tendency of the corporate ownership structure, the preference for direct entrepreneurship, the absence of well-organized M&A institutions and systems and the generally negative perception of M&A in the country. Once the limit on the ownership of large quantities of listed shares is lifted in 1997, pursuant to the amended Article 200 of the Securities Trade Act, M&A will begin to proliferate in Korea as it does elsewhere around the world. This is especially true because globalization and liberalization are forcing Korean businesses to enhance their competitiveness, while the Korean government prepares to enact new policies on industrial restructuring and M&A regulations. As of yet, however, there is no systematic institution for ensuring the effective management and monitoring of the related activities.
M&A can bring about great synergy by increasing the efficiency of the governance of a given business and enhancing its leadership over the market. M&A involves maximizing the efficiency of management and the productivity of capital investments by ensuring the optimal allocation of management resources throughout the business. The goal is to raise the quality of products and services and to lower prices. M&A also greatly facilitates the restructuring that is necessary to improve the competitiveness of industries and businesses. Notwithstanding these benefits, however, M&A is also feared because it increases the likelihood of a business monopolizing the market and it also tends to decrease initial public offerings (IPOs).
Therefore, the Korean government needs to introduce clear and fair rules and systems that can maximize the benefits of M&A and minimize its costs and risks so as to benefit Korean industries and households. The reform of the current M&A system in Korea should focus on restoring the natural and effective market function while maximizing the economic benefits of M&A and minimizing confusion and other repercussions on business management. The Korean government, moreover, should clearly define and adjust the principles that apply to the reformed system so that it is reconciled with other systems.
In sum, the following changes are in order. First, increase the transparency of the overall system by providing the participants with fair opportunities, extending the duty of public disclosure (on the number of shares being purchased and the large blocks of shares owned) onto co-parties of each given M&A deal and also otherwise enhancing procedural transparency. Second, introduce measures to protect small shareholders. M&A led by large corporations or the takeover of small and medium businesses may still be permitted, but the fair trade law and the organization in charge of applying it should both be strengthened so that they can monitor possible monopolies and prevent them from arising. Other changes to be implemented include: new regulations on the participation eligibility of investors; clearly defined rules on the extent of M&A of Korean businesses by foreign investors; new goals of the regulatory regime and fair trade laws; and the introduction of basic principles on the M&A of non-listed companies.
기업매수 합병(M&A)제도의 개선방안(Improving the corporate merger and acquisition system)
|Series Title; No||정책포럼 / 110호(9613)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Entrepreneurship|
|Holding||KDI; KDI School|