[Edaily Marketin, Reporter YunJi Kim ] Will this year’s domestic mergers and acquisitions (M&A) market follow a “slow start, strong finish” pattern?

As recently as the first half of the year, there were high expectations that the market would regain momentum as a series of major deals were finalized in the second half. However, with the slump in transactions continuing into the third quarter, market attention is now turning to the fourth quarter. Whether the market rebounds will depend on how many of the major deals already under contract are finalized by the end of the year.

From trillions to hundreds of billions of won… Awaiting year-end closings

One of the most closely watched deals in the domestic M&A market recently is the acquisition of Lotte Rental by Texas Pacific Group (TPG), a global private equity fund (PEF) manager. Last August, TPG signed a share purchase agreement (SPA) to acquire a 61.2% stake in Lotte Rental—held by Hotel Lotte and Busan Lotte Hotel—for 1.3105 trillion won. After receiving approval for the business combination from the Fair Trade Commission last month, the deal has cleared a major hurdle toward completion. Lotte Group plans to finalize the transaction this month following subsequent procedures, such as a shareholders’ meeting.

Following the Lotte Rental deal, other transactions worth hundreds of billions of won are also undergoing follow-up procedures with the goal of closing by the end of the year. In August, SK Eco Plant signed a share purchase agreement (SPA) to sell a 35.62% stake in SK Ocean Plant to a consortium led by D’Ocean Asset Management for 410 billion won. Although the scheduled completion date for the stake disposal, as disclosed, is the end of December, ongoing discussions with Goseong County in South Gyeongsang Province and other parties regarding regional investment and employment issues following the acquisition remain a variable. Once the acquisition is finalized, D’Ocean Asset Management will become the largest shareholder of SK Ocean Plant.

In the financial sector, the acquisition of Acuon Capital and Acuon Savings Bank is drawing attention. Hanwha Life, in partnership with Centroid PE, signed an agreement in late September to acquire a 96.06% stake in Acuon Capital from EQT Partners. The total transaction value is approximately 870 billion won, and the deal is structured to include the acquisition of Acuon Savings Bank, in which Acuon Capital holds a 100% stake. However, as follow-up procedures—such as approval from financial authorities—remain, the actual closing date has not yet been finalized.

Among these, the combined acquisition amounts for Lotte Rental and SK Ocean Plant alone total 1.7205 trillion won, accounting for approximately 67% of the total M&A transaction value for the third quarter of this year (2.5675 trillion won). If these two transactions are finalized as scheduled by the end of the year, they are expected to have a significant impact on boosting the transaction value for the fourth quarter. Given the sharp decline in third-quarter transaction volume, quarterly performance could hinge on whether one or two major deals are completed.

Some final payment schedules extend into next year… 4Q rebound remains uncertain

However, not all of the major deals announced in the third quarter will be reflected in this year’s results. While down payments have been made for some transactions, the payment of the balance and the closing of the deals are scheduled for next year, so they are not expected to be reflected in the fourth-quarter transaction completion figures.

A prime example is Doosan’s acquisition of SK Siltron. Last July, Doosan signed an agreement to acquire a 70.6% stake in SK Siltron—a semiconductor wafer manufacturer owned by SK—for 2.3 trillion won. Although this is one of the largest deals in the domestic M&A market this year, the scheduled closing date listed in the public disclosure is the end of January next year.

The same applies to Hyundai Mobis’ sale of its automotive lighting business. In September, Hyundai Mobis signed a definitive agreement worth approximately 600 billion won with French auto parts company OP Mobility. The transaction will involve spinning off the lighting business into a separate legal entity before transferring the shares; the company plans to complete the spin-off in April of next year and finalize the deal in the second half of the year.

It is not uncommon in the M&A market for a significant amount of time to elapse between the signing of a contract and the actual completion of a transaction. This is because there are numerous procedures to navigate, ranging from securing acquisition funding to merger reviews and obtaining approvals from relevant authorities. In particular, the larger the transaction—ranging from hundreds of billions of won to trillions of won—the more likely a delayed closing date is to impact quarterly market volume.

In fact, the domestic M&A market has not always rebounded in the fourth quarter of each year. While there have been years when transaction volumes surged significantly due to a concentration of large deals toward the end of the year, there have also been years when activity actually contracted compared to the previous quarter. Since performance is calculated based on the completion date of transactions, the overall market trend can vary depending on which quarter certain large deals are finalized.

There is also a widespread view that even if transaction volume rebounds in the fourth quarter, it would be difficult to interpret this as a recovery of the M&A market as a whole. This is because, given the sharp decline in transaction volume in the third quarter, the total transaction value could rise significantly even if just one or two deals worth trillions of won are finalized. An official in the capital markets sector stated, “It remains to be seen whether new transactions will pick up, as there is still a gap in expectations regarding corporate value between sellers and buyers, and the burden of securing acquisition financing persists.” The official added, “The increase in the number of large deals that have already been contracted but are yet to close is distinct from a revival of overall investment demand in the market; therefore, to determine whether a genuine recovery is underway, we must also examine the number of transactions and the growth trend in small- and medium-sized deals.”