Korea emerges as a promising tech M&A market

As little as five years ago, it was difficult for Korea’s venture investors and the entrepreneurs they financed to see opportunities for exits. Initial public offerings were as rare as unicorns, and the country’s top conglomerates were M&A-shy. Emerging companies lacked the deep pockets required for serious M&A activity as well.

That’s all changed.

A growing number of the nation’s most aggressive, innovation-driven companies are embracing acquisitions to rapidly gain market share in new areas and capitalize on business model expansion.

Seoul by twilight / Photo credit: Aomami

Yello Mobile was the first Korean tech company to embrace acquisition as a key business growth strategy. In 2014, the firm acquired a staggering 61 companies in Korea and across Asia. While its fortunes have been mixed since the early buying spree, it can be credited with invigorating a quiet M&A market and starting a trend that has been on the rise ever since.

Fast forward to December 2019, and KakaoKids, the educational services subsidiary of local conglomerate Kakao Group, and English education startup Yanadoo have approved a merger.

The two companies, which boasted combined sales of US$60 million in 2019, anticipate sales of more than US$80 million this year and aim to achieve a US$2.5 billion valuation to become Korea’s largest educational platform.

The move underscores a new willingness by Korean tech companies to engage in Silicon Valley-style open innovation through M&A deals.

While traditionally averse to startup acquisitions, corporations in the country have grown considerably warmer to the idea in recent years. Major conglomerates such as Hyundai, Lotte, Samsung, Hanwha, and Posco have founded accelerators or created funds to engage more with startups. LB Investment, one of Korea’s most active tech investors, is closely linked with LG Electronics, and most of Korea’s banks have established accelerators as well.

A quartet of Korean tech firms have demonstrated particular interest in pursuing M&As in the last year: Kakao Group, Naver Corporation, Yanolja, and Baemin.

Kakao Group

The KakaoKids-Yanadoo merger was just the latest move by the Kakao Group.

According to Korea’s Fair Trade Commission, the conglomerate acquired 17 new subsidiaries between August and November 2019 – the most of any large Korean company and far outpacing even the likes of Silicon Valley giants Google and Facebook.

Kakao Mobility, the company’s transportation subsidiary, went on a buying binge from August 2019, purchasing five taxi companies in a bid to become a more comprehensive mobility platform. This included the company’s acquisition in September of Tago Solutions, a mobility startup affiliated with 50 taxi companies.

Tago Solutions, renamed KM Solutions after the acquisition, offers a range of taxi services such as Waygo Blue (taxis that do not reject passengers) and Waygo Lady (taxis that are driven by women and only serve female customers).

Naver Corporation

Yanolja

Woowa Brothers

Providing good exits