Sluggish M&A Market Stalls Amid Widening Valuation Gap

Domestic M&A Deals Plummet as Billion-Dollar Transactions Vanish
Sellers Hold Out for Higher Prices While Buyers Balk
Major Deals Including HPSP and CJ Bio Fall Through

South Korea’s mergers and acquisitions (M&A) market has yet to regain its momentum. Even large-scale transactions that were expected to close this year have stalled despite reaching broad agreements. Industry experts describe the domestic M&A landscape as a “market at a standstill over valuation mismatches.” They point out that while the economy remains sluggish and global uncertainty from the U.S. and China grows, sellers are clinging to bullish valuations reminiscent of boom times, making deal closures increasingly difficult.

Widening Gap Between Buyer and Seller Expectations

According to investment banking (IB) sources on the 23rd, Hyosung Advanced Materials, a carbon fiber specialist, has been seeking to sell its tire steel cord division since the first half of the year. Following preliminary bids in May and a main bidding round in June, Bain Capital was selected as the preferred bidder at the end of July. Earlier market expectations had pointed to JKL Partners or STIC Investments, but the prolonged selection process suggests dissatisfaction with the initial price offers. Nearly three months later, however, the final contract has yet to be signed, as the two sides reportedly remain hundreds of millions of dollars apart. Observers expect additional time will be needed to bridge the gap.

The sale of waste management firm Koentec is also progressing slowly. After holding a preliminary bid in late June, the main bid took place in early September, attracting IMM Private Equity, Affirma Capital, and Geocapital. Although a preferred bidder was expected to be chosen shortly thereafter, no decision has been announced. As with other transactions, price disagreements appear to be the main obstacle. While bidders submitted similar offers, the sellers—E&F Private Equity and IS Dongseo—reportedly found the valuations unsatisfactory, with IS Dongseo particularly reluctant to lower expectations.

Several other deals have already fallen through over similar pricing disputes. In May, Crescendo Equity Partners decided to postpone the sale of its 40% stake in semiconductor equipment manufacturer HPSP. The fund had hoped to fetch more than $1.4 billion but failed to find a buyer meeting that valuation. Although multiple bidders participated in the initial round, most offered well below the seller’s expectations.

CJ CheilJedang’s plan to divest its bio division, valued at roughly $3.6 billion, was also abandoned after failing to reconcile price differences with potential buyers such as MBK Partners and several Chinese investors. Likewise, CJ’s attempt to sell its Brazilian soy protein producer CJ Selecta collapsed despite a signed contract in 2023 valued at approximately $340 million, which never reached completion.

Large Conglomerates Focus on Asset Sales Over Acquisitions

In the second half of the year, billion-dollar deals have all but disappeared. The bold acquisitions of the early 2020s—SK hynix’s $7.1 billion purchase of Intel’s NAND business, Shinsegae Group’s $2.4 billion acquisition of eBay Korea (Gmarket), and DN Group’s $1.7 billion purchase of DN Solutions (formerly Doosan Machine Tools)—now seem like relics of a bygone era. One of the few sizable transactions this year was K-beauty firm Goodai Global’s $410 million acquisition of Serin Company alongside financial investor Company K Partners.

According to PwC Korea, domestic M&A activity in the first half of the year totaled 737 deals, down 10% year-on-year, with an aggregate value of $20.9 billion—a 15% decline. By contrast, global M&A deal volume fell only 6% during the same period, while the total transaction value rose 16% thanks to a surge in megadeals exceeding $3.5 billion. This underscores how South Korea’s M&A market remains notably subdued even amid global resilience. Last year, the domestic market had still grown 30% year-on-year in total deal value.

In addition to valuation mismatches, another factor is that large conglomerates have increasingly become sellers rather than buyers. Hit by mounting financial pressure from the combined effects of Chinese competition and U.S. policy uncertainty, major groups are prioritizing liquidity through divestments instead of acquisitions. SK Group, for instance, sold several assets last year—including SK Specialty ($1.9 billion), SK Rent-a-Car ($560 million), SK PUcore ($270 million), and SK Enpulse’s CMP pad division ($240 million)—and is now preparing further sales such as SK Siltron ($2.1–2.8 billion), two SK Ecoplant environment subsidiaries ($1.4 billion), and SK IE Technology ($700 million).

Major Assets Struggle to Find Buyers

The persistent slump has led analysts to doubt whether billion-dollar assets currently on the market—such as Lotte Card, Lotte Insurance, Classys, KDB Life, and Hyosung Chemical’s business division—can be sold by year-end. While large deals typically rely on participation from foreign strategic investors or global private equity firms, overseas capital inflows have slowed sharply this year.

Domestic private equity funds are also less active than before. Many have ample dry powder but face difficulties recycling capital due to a blocked exit market. Having aggressively built up portfolios in recent years, funds now find themselves unable to divest holdings, resulting in an accumulation of illiquid assets and delayed new investments.

Compounding matters, amendments to the Capital Markets Act and Commercial Act are expected to pass within the year. These revisions would allow minority shareholders to share in the control premium previously reserved for majority owners, a change that could further chill M&A activity. Reduced premiums would make sellers less inclined to divest while forcing buyers to pay more. For funds that acquire listed companies, the implications are especially significant: they would be required to conduct public tenders for minority stakes as well, inflating total acquisition costs and tightening financing conditions.

As a result, concerns are mounting that South Korea’s M&A freeze may persist. A private equity executive observed, “There are plenty of assets on the market, but persistent valuation gaps and the dominance of divestments over strategic acquisitions make it hard to expect strong results. Without improved market conditions, we’re likely to see muted activity.” Another executive added, “Deal success now depends less on asset quality or business potential and more on how realistic the valuation is. Large-scale transactions this year and next will inevitably face renegotiations, delays, or outright failures.”