According to Yonhap News,

(SEOUL = Yonhap News) Korea will increase the deal volume of its merger and acquisitions (M&A) market to KRW 7 trillion by 2017, according to Hyun Oh-seok, Deputy Prime Minister and the Minister of Strategy and Finance.

Hyun announced a set of measures for promoting M&A in Korea in a joint briefing at the Government Complex Sejong on March 6. Briefing attendees included Noh Dae-lae, Chairman of the Korea Fair Trade Commission, and Shin Je-yoon, Chairman of the Financial Services Commission.

The financial minister forecast that the measures will increase the volume of the nation’s M&A market from KRW 4 trillion in 2013 to KRW 7 trillion in 2017. He also called for active support from businesses, investors and other market participants.

“Korea’s M&A market is relatively small compared to that of other developed nations and has continued to shrink after the global financial crisis,” said Hyun. “This not only prevents companies from carrying out business restructuring and focusing their investments on core business areas, but also makes it harder for companies to retrieve their investments in venture start-ups.”

“If we want to create a ‘dynamic economy,’ we need to first create a sustainable business environment where venture start-ups can grow into medium-sized companies and eventually become global companies,” said Hyun. “But this is only possible when many companies actively participate in the local M&A market.”

To boost the local M&A market, the government suggested easing regulations.

“We will allow private equity funds (PEFs), the main buyers in the local M&A market, to acquire companies through both stock purchase and business transfer,” said Hyun.

“The government will lift various restrictions, such as voting restrictions on local PEFs operated by financial institutions, in a bid to open the way for local PEFs to compete with equal footing with foreign PEFs,” the minister added.

The government will also streamline financial and tax support systems for M&A activities.

According to the financial minister, the government plans to increase the allocated amount for M&A for small- and medium-sized enterprises (SMEs) within the “Growth Ladder Fund” up to KRW 1 trillion in three years. The minister also introduced the government’s plan to create a KRW 1 trillion private equity fund for corporate normalization with various financial institutions, credit banks and pension funds.

Hyun also said the government plans to reduce the tax burden on companies undergoing restructuring and ease the financial burden for buyers by implementing tax exemptions for M&A activities conducted through a share exchange.

The government is also set to apply the deemed acquisition tax exemption to the Korean Securities Dealers Automated Quotations (KOSDAQ) market. The deemed acquisition tax is imposed on investors who become oligopolistic stockholders of a company through M&A activities, and it is currently only applied to the Korea Composite Stock Price Index (KOSPI) market.

Other measures to boost the local M&A market include easing stiff M&A standards and regulations.

“The government will ease the regulation on the price of M&A activities involving listed companies so the companies will be able to offer appropriate premiums on M&A transactions,” said Hyun. “It will also introduce acquisition structures such as the reverse triangular merger, triangulation and triangular stock exchange, which are widely used in foreign M&A markets, to encourage companies to carry out various types of M&A activities.”

“We have witnessed many cases where foreign venture start-ups grew into leading global companies,” said Hyun. “There are a number of companies trying to find their way, to survive in a constantly changing business environment. They carry out M&A activities to replace the old with the new and focus on what they do best.”

“Our companies will become more competitive if they can focus on core business areas by carrying out M&A activities,” said the minister. “If the companies can retrieve their investments in venture start-ups and SMEs through M&A activities, they will be keen to invest in other young companies. We expect that this virtuous cycle will help the government vitalize the economy as a whole.”

The minister also added that the vitalization of the local M&A market is expected to stimulate business restructuring and contribute to public sector reform.