A mandatory tender offer rule requiring buyers of controlling stakes in listed companies to purchase minority shares on the same terms offered to major shareholders is expected to take effect this year. On the 17th, the National Assembly's National Policy Committee approved an amendment to the Capital Markets Act under which anyone who becomes the largest shareholder by acquiring 25% or more of a listed company must extend a tender offer covering shares up to "50% plus one," including holdings already owned. The same standard applies when a largest shareholder who already holds 25% or more buys additional shares. The rule, introduced in 1997 and scrapped the following year to spur corporate restructuring and mergers and acquisitions during the foreign exchange crisis, is being revived after 28 years.
The intent behind the rule is understandable: to share the control premium once enjoyed only by major shareholders with minority investors and to guarantee them a chance to sell. But M&A involving listed companies could shrink as acquisition costs rise for corporate buyers and private equity funds. There is also considerable concern that acquirers will have less capacity to invest after closing a deal. In addition, global capital, which is far larger than domestic private equity funds, is likely to dominate bidding for large or high-growth Korean companies.
Rigorous merger reviews are also slowing deals. According to the office of Rep. Cho Jung-hoon of the People Power Party, the Fair Trade Commission took an average of 64.5 days to complete standard merger reviews in the first half of this year, 17.4 days longer than last year. In its review of the combination of Naver Financial and Dunamu, the regulator requested additional documents 13 times. The risks of monopoly and restraint of competition must be examined strictly. Even so, if there is no way to gauge when a review will end, uncertainty over investment in new industries is bound to grow.
M&A is a core tool not only for business succession but also for industrial restructuring that winds down marginal operations and shifts capital and technology into new businesses. In advanced industries where technology changes quickly, speed itself is a competitive edge. As companies in major economies build scale and secure cutting-edge technology through M&A, Korea needs to ask whether raising regulatory hurdles for deals is the right course. What is required is a carefully designed M&A policy that balances protection for minority shareholders, fair competition and industrial competitiveness.
