Friday, March 10, 2006

The M&A Debate

There has been a recent flurry of news in Korea over the unsolicited bid for KT&G. The issue of hostile takeovers of companies by foreigners is a story being mimicked around the globe. The US has been in a frenzy over the Dubai ports deal which has been rejected on the ground of national security. Europe too is caught up in a web of hostile takeovers. Although "the European laws protect the free movement of capital, allowing companies to invest money where they choose" that premise has come under fire. France has gone so far as to list industries which it says it needs to protect for the sake of national security.

Since the KT&G hostile bid Korea has been engaged in a tough debate regarding its stance on unwanted foreign interest. The bid on KT&G has brought about concerns of similar attacks on companies such as POSCO and the state of regulations regarding foreign investment in Korea. Part of the problem, some say, is that since the financial crisis in 1997 the Seoul stocks are too attractive inviting short-term profit grabbing over long-term commitments. In the Korean case, KT&G can hardly be defended on the grounds of national security. It seems unlikely that those calling for greater protection are going to win this case. Especially since it seems Korea has an (unrealised) ambition of being a financial hub (although apparently it has achieved hub status in one area).

It would seem that Korea need only look to US and EU to see that this debate is never going to be resolved. As long as you allow hostile M&A you will have people who think the rules are too lax and people who think they are too tight. You can drag out the ol' 'national security', or 'infant industry' or 'multifunctionality' parlance but its all the same thing.

Currently reading:

"Hell" by Yasutaka Tsutsui