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M&A형 외국인투자 활성화를 위한 과제(Tasks to revitalize foreign investment in the form of M&A)

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Title M&A형 외국인투자 활성화를 위한 과제(Tasks to revitalize foreign investment in the form of M&A)
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Material Type Reports
Author(Korean)

김승진

Publisher

[서울]:한국개발연구원

Date 1998
Series Title; No 정책포럼 / 제143호(9808)
Pages 8
Subject Country South Korea(Asia and Pacific)
Language Korean
File Type Documents
Original Format pdf
Subject Economy < Direct Investment

Abstract

This study seeks to analyze the current condition of foreign investment in the form of mergers and acquisitions (M&A), thereby providing tasks to be executed by the government so as to attract foreign investment.
Growing concerns on foreign investment claim that investments in the form of M&A are not entering Korea dynamically in spite of the government’s repealing of various M&A related regulations to attract foreign investments in the form of M&A, as an approach to overcoming the economic crisis. Given this context, this study seeks to examine and analyze the M&A foreign investments and suggest relevant tasks and roles of the government.
Foreign investments in the form of M&A in a narrow sense only refer to investments that are acquired in the form of old shares. In a broader context, business transfers and asset acquisitions are also forms of foreign investment. At present, foreign investment is classified as old or new share acquisition. Partial transfers and asset acquisitions are classified as new share acquisitions.
Foreign investments that come in the form of old shares have been increasing this year, but not actively enough. Investments acquiring old shares in comparison to GDP have recorded an increase to 0.47% in 1998 (January–August) from 0.16% of the previous year. This increase however, is still minimal as compared to other countries.
Hence, foreign investments in the form of business transfers and asset acquisitions are assumed to be relatively more active than investments in old shares. This study limits the scope of observation to procedural problems that block the M&A of the transaction parties and seeks to examine tools and approaches that can revitalize such transactions. Measures that boost the incentive for sale and purchase must be brought in. Factors that block M&A foreign investments including old share acquisition, business transfer and asset acquisition can be summarized as: inadequate transparency in accounting information, obligatory employment buyout, creditor’s agreement, and unstable macroeconomic environment.
As such, the government should reduce obligations for employment buyouts and induce the establishment of (non-performing) bond trading companies built on private capital. At the same time, it should designate the sale and purchases prices in accordance with the company’s value, hence preventing the abuse of appraisal rights of shareholders.