South Korean CEOs: 56% Plan M&A Within a Year... 58% Also Plan Divestments

EY Han Young Surveys 1,200 Global CEOs
South Korean CEOs Use or Pilot AI for Transaction Evaluation
46% "Expect AI to Shorten Transaction and Due Diligence Timelines"

More than half of South Korean CEOs plan to pursue mergers and acquisitions (M&A) or sell businesses within the next year, a survey found. The trend suggests that more companies are restructuring their business portfolios through a "focus and select" strategy, acquiring new businesses while shedding non-core operations.

On November 3, EY Korea said that 56% of South Korean CEOs surveyed planned to pursue M&A within the next 12 months, according to the results of its "EY-Parthenon CEO Outlook Survey." The share planning transactions involving business sales also reached 58%. Compared with the same survey in May, the figures were up 12 and 16 percentage points, respectively. The survey covered 1,200 CEOs in 21 countries, including South Korea.

Eightfold increase in CEOs planning to sell off parts of their businesses

In particular, 16% of South Korean CEOs said they planned a "carve-out" or partial sale, in which part of a business is separated and sold. That was eight times the 2% recorded in the May survey. The figure was also more than double the response rate among global CEOs (7%).

A carve-out is a transaction in which a company separates and sells a specific business unit or assets. It can be used to raise funds by shedding non-core businesses without selling the entire company, or to focus investment capacity on businesses with growth potential.

The survey also found a tendency to strengthen existing businesses as part of growth strategies. Sixty-four percent of South Korean CEOs said their growth strategies focused more on strengthening existing businesses than on innovation. The same was true of 69% of global CEOs. This suggests that rather than expanding into new businesses indiscriminately, companies are seeking to improve the profitability and competitiveness of existing operations while investing selectively in areas where needed.

Preparing for due diligence is the biggest challenge in the sale process. Companies seeking to sell businesses are also facing difficulties in preparing for transactions. Forty percent of South Korean CEOs identified being adequately prepared for due diligence by buyers as the biggest challenge in their most recent business sale.

Thirty-two percent of respondents named maximizing sale value while managing the pace and costs of a transaction as a key challenge. As portfolio restructuring through M&A and business sales becomes more active, finding suitable counterparties, responding to due diligence, and managing transaction terms are all becoming increasingly important.

96% use AI in transaction evaluations... Focus on company valuation

More companies are also using artificial intelligence (AI) in M&A and business sales. Ninety-six percent of South Korean CEOs said they had either piloted AI or were using it in their transaction evaluation work. Of these, 32% said they applied AI to most transaction evaluation tasks, 20 percentage points higher than the figure for global CEOs (12%).

The areas where AI was used most actively were financial analysis and company valuation, cited by 58% of respondents. These were followed by risk assessment and compliance reviews (48%), identifying post-acquisition synergies and developing value-creation plans (42%), and analyzing market and competitive conditions (42%). South Korean CEOs were also more likely than their global counterparts to say they used AI for commercial due diligence, which assesses a target company's business performance and market competitiveness: 35%, compared with 25% globally.

South Korean and global CEOs differed in the benefits they expected from adopting AI. Forty-six percent of South Korean CEOs cited shorter transaction execution and due diligence periods as the biggest changes AI and advanced data analytics would bring to business sales, 11 percentage points higher than the figure for global CEOs (35%). Fifty-two percent of South Korean CEOs said they reinvested the time and resources freed up by AI-driven productivity gains into growth or innovation.

By contrast, global CEOs had relatively higher expectations for identifying and quantifying value-creation opportunities in the early stages of a sale (45%) and making fast, accurate decisions (41%). The analysis suggests that South Korean companies place greater emphasis on reducing the time and costs involved in transactions, while global companies focus more on increasing their strategic value.

"As uncertainty grows, companies should keep both acquisitions and sales on the table and continually review their portfolios so they can concentrate capital and capabilities on core businesses and future growth," said Gil Taemin, partner at EY-Parthenon and leader of its M&A Solutions Group. "AI should be used not only to speed up transactions but also more broadly to identify value-creation opportunities early and improve the quality of investment decisions."

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