95% of Korean CEOs Plan to Increase M&A... Prioritizing Managerial Burden, Geopolitical, and Regulatory Factors

EY Korea Releases Results of Global CEO Survey
Overseas CEOs Prioritize Enhancement of Technology and AI Capabilities

Korean chief executive officers (CEOs) are expected to pursue mergers and acquisitions (M&A) with strong intent for expansion, yet to do so with a more cautious and selective approach compared to their global counterparts.

On June 29, EY Korea, a global accounting and consulting firm, released the results of its 'EY-Parthenon CEO Outlook Survey,' which contained these findings.

This survey, which included 1,200 CEOs from 21 countries worldwide, including Korea, analyzes executive perspectives on key trends and changes affecting major global corporations, such as M&A strategies, portfolio management, and the impact of macroeconomic and geopolitical environments.

According to the survey results, 58% of Korean CEOs identified geopolitical tensions and instability as the most significant business risk for the next 12 months. Nevertheless, their willingness to expand M&A activities remains strong. Among the domestic respondents planning to actively pursue M&A, 95% expected their company's commitment to M&A to increase, a level higher than the global average of 89%.

Within the domestic market, the need to resolve geopolitical issues and secure AI and technological capabilities is being considered as a primary purpose for M&A. To achieve this, active consideration is expected to be given to portfolio rationalization through the sale of existing businesses. In fact, when making future decisions regarding portfolio acquisitions or divestitures, Korean CEOs cited the following as the most important factors: ▲ managerial burden and organizational complexity (36%) ▲ geopolitical and regulatory risks (32%) ▲ capital investment burden and impact on financial soundness (32%) ▲ potential to enhance technological and AI capabilities (32%).

In comparison, global CEOs prioritized enhancement of technology and AI capabilities (48%) and alignment with long-term growth strategies (47%) as their top factors. This suggests that, rather than focusing on growth opportunities, Korean companies place greater emphasis on the burden of organizational complexity and external risk factors.

Global CEOs Consider Strategic Alliances and Joint Ventures in Addition to M&A

Differences were also found between global and Korean companies in terms of deal structures. While global CEOs consider a wide range of collaborative strategies, such as strategic alliances (57%) and joint ventures (45%), alongside M&A (62%), 44% of Korean CEOs indicated plans to adjust their portfolios through M&A, and 42% through business divestitures. Joint ventures (34%) and strategic alliances (30%) accounted for a relatively lower proportion, reflecting a tendency among Korean CEOs to prefer direct portfolio restructuring over collaborative arrangements.

Regarding preferred investment destinations, 44% of Korean CEOs ranked Korea as their top choice for future capital investment, followed by India (19%), Japan (18%), Singapore (10%), and the United States (10%). Notably, according to the responses from global CEOs, India also ranked as the second most preferred investment destination (19%) after the United States (30%), highlighting its perception as a key growth market.

Gil Taemin, EY-Parthenon Partner and M&A Solutions Group Leader, stated, "Among Korean conglomerates, the gap in growth potential and corporate value is widening between companies that have proactively restructured their portfolios through active acquisitions and divestitures and those that have not. In an environment of increasing volatility due to global geopolitical risks and changes in AI-driven business models, it is time to redefine M&A and divestiture strategies that are both prudent and bold."

This content was produced with the assistance of AI translation services.