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Korea aims to expand M&A market by 75%

The South Korean government will give a much-needed boost to mergers and acquisitions activities in the next three years, setting a goal of expanding the local M&A market.

The Finance Ministry announced on Thursday that the government is looking to amend and abolish a number of regulations so as to encourage corporate takeovers and more private-equity-backed M&A deals.

The government is targeting to increase the volume local M&A market around 70 trillion won ($65 billion) by 2017, from about 40 trillion won in 2013, Deputy Prime Minister and Finance Minister Hyun Oh-seok said.

Hyun unveiled Thursday a range of measures aiming at improving the local M&A market.

The plans agreed by seven other ministries include easing regulations on private equity firms and providing capital for mergers and acquisitions.

The Asia’s fourth-largest economy still has a relatively small M&A market in terms of deal volume, compared to those of other advanced economies, according to the finance minister.

“M&A activities in Korea are, in fact, further shrinking in the wake of the global financial crisis,” he said. He blamed, in particular, strict regulations on private equity funds for the country’s sluggish M&A market growth.

To boost private equity-backed M&A deals, the government will discard voting right restrictions and also strict disclosure obligations placed on PEFs under the fair trade law, Hyun said.

The finance minister added the government would also make it easier for PEF-owned companies to list their shares on the local stock market. Until now, strict rules on investor protection blocked such companies from going public.

Other steps announced Thursday include expanding the size of a fund for the M&A activities of start-ups and small and medium-sized firms to around 1 trillion won within next three years, and also introducing tax-exemption to M&A deals carried out through a share exchange.

Hyun said that the aim of new measures was to ensure growth of venture start-ups and promising small and mid-sized enterprises.

“We want create a ‘dynamic economy’ by turning venture start-ups into global companies. But this is impossible without active participation in the mergers and acquisitions market,” he said.

He also noted that boosting venture start-ups through M&As is a key part of the Park Geun-hye administration’s three-year economic revitalization plan.

President Park recently announced the three-year-long economic innovation plan that focuses mostly on reforming regulations and economic structures by 2017.

By Oh Kyu-wook (