Year in review: mergers & acquisitions in South Korea

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Year in review

The Korean M&A market demonstrated signs of gradual recovery in 2025, stimulated by the Bank of Korea's easing of monetary policy in late 2024. The total M&A transaction volume in the first half of 2025 (for change of control transactions valued at 5 billion won or more) reached 14.75 trillion won, a 67 per cent increase compared to the latter half of 2024. According to Bloomberg, the domestic M&A market recorded 1,277 deals totalling US$46.2 billion in the first half of 2025, evidencing a slight increase in both deal volume and value.² However, this rebound remains restrained, and the market has not fully regained deal momentum, with total deal value still lagging behind the 17.33 trillion won recorded in the first half of 2023.

As of the end of the third quarter of 2025, carve-out transactions have highlighted the domestic M&A landscape over the past year. The increased carve-out activity is driven by large conglomerates (notably SK, LG, and Lotte groups), which are undertaking restructuring and divestment of non-core assets in order to improve cash liquidity and concentrate on selected core businesses.

This environment has led to a notable shift in market dynamics, with strategic investors (SIs) accounting for a higher proportion of deals as they pursue business reorganisation, secure new technologies and develop strategies to overcome trade barriers. While private equity funds (PEFs) possess substantial dry powder and stand ready to digest assets, they have been generally cautious and selective in deploying their capital in 2025. Private equity funds nonetheless have provided timely exits and liquidity to Korean conglomerates pursuing carve-out sales of their non-core businesses and assets.

The first half of 2025 saw several high-profile transactions reflecting these trends. Notably, conglomerate carve-out sales included SK group’s sale of SK Specialty to Hahn & Company (2.6 trillion won), LG group’s sale of LG Chemical's Water Solutions business to Glenwood PE (1.4 trillion won), and Lotte group’s sale of Lotte Rental to Affinity Equity Partners (approximately 1.6 trillion won).

Looking ahead to the remainder of 2025, investments related to industrial restructuring, such as the divestiture of non-core businesses, are expected to remain central. The pipeline for small deals is also anticipated to be strong, driven by M&A strategies focused on securing core technologies and enhancing corporate value.

The new administration of President Lee Jae-Myung has demonstrated a strong commitment to corporate governance reform and the protection of minority shareholder rights. This focus has spurred a wave of proposed amendments of the Korean Commercial Code (KCC) and the Financial Investment Services and Capital Markets Act (FSCMA).

A key aim of the FSCMA amendments is to bolster minority shareholder protections in major corporate transactions such as mergers, spin-offs, and significant asset transfers. The amended law strengthens the quality and volume of disclosures in such transactions, including mandatory disclosure of external valuation reports, and boards will be required to issue and disclose opinions on the transaction's purpose and valuation. In a significant shift, the rigid, stock-price-based formula for calculating merger ratios in mergers of publicly listed companies on the Korea Exchange will be discarded, including for transactions between affiliates.³ This reform will allow such merger ratios to be set based on a more holistic assessment of publicly listed companies' intrinsic value, considering assets and earnings alongside prevailing stock price.

Additional protections for minority shareholders in the context of vertical spin-offs are also proposed, including a proposal for non-controlling shareholders of a parent company to receive a certain priority allocation of new issued shares in an initial public offering of a vertically spun-off subsidiary. Furthermore, the Korea Exchange (KRX) now tends to extend its review period for proposed public listings of vertically spun-off companies in order to carefully review the parent company's efforts to protect its minority shareholders, potentially restricting an initial public offering and listing where minority shareholder protection measures are found to be lacking.

Another significant proposed change for M&A of publicly listed companies is the introduction of a mandatory tender offer regime in control acquisitions of publicly listed companies on the Korea Exchange. Bills currently pending review at the National Assembly propose to mandate a tender offer in change-of-control acquisitions of publicly listed companies on the Korea Exchange. One prominent proposal would compel a potential acquirer of a 25 per cent+ equity stake of a publicly listed company to become its largest shareholder to launch a tender offer for at least a majority of the issued and outstanding equity interest (50 per cent of issued and outstanding shares plus one share), whereas a more aggressive proposal would mandate a tender offer launch for 100 per cent of the company's issued and outstanding shares.

Amendments of the KCC are fundamentally reshaping corporate governance of Korean companies. In perhaps one of the most important corporate law developments in recent times, the KCC has recently been amended to expand the duty of loyalty of directors on the board of directors to extend to not only the company itself but also to all shareholders of the company. The rules governing the election of independent directors on the audit committee of boards have been amended to strengthen the influence of minority shareholders, and large-sized publicly listed companies will soon be subject to a mandatory cumulative voting regime, which is expected to significantly bolster the representation of minority shareholder designees on boards of directors of such companies. Together, these changes are designed to empower minority shareholders and dilute the influence of controlling shareholders on the composition of, and actions by, the board.

These regulatory shifts, highlighted in the 'New Government Economic Growth Strategy' announced by the Ministry of Economy and Finance in August 2025, will materially alter M&A dynamics. Acquirers must now carefully design new structures for control acquisitions and consider changes to transaction timelines and funding requirements. With the expanded scope of the Stewardship Code and new governance hurdles, acquirers will also be subject to additional post-closing management burdens.