i OVERVIEW OF M&A ACTIVITY IN 2018

Korean M&A activity in 2018 showed a slowdown in deal value compared to the previous year, with 1,167 completed cases and a total value of US$52.8 billion (a 17.1 per cent decrease from 2017 in total deal value).2 While the number of transactions increased by 12.7 per cent from 2017, the total deal value declined. A rise in uncertainty in the global economy resulting from international trade disputes, Brexit and other factors seem to have led to a decline in larger-sized deals.

Domestic M&A activity involving Korean companies showed more mixed signals, with 570 acquisitions of Korean companies by other Korean companies (up from 514 in 2017) worth US$37.2 billion (down from US$46.0 billion in 2017).3 The increase in the number of domestic M&A transactions is generally credited to an increase in small-sized deals for business restructuring purposes. There was a particular increase in domestic M&A transactions among affiliates, recording the highest number in the past five years.

The number of transactions as well as deal value of inbound M&A (i.e., overseas companies acquiring Korean companies) declined conspicuously, with 37 transactions (down from 41 in 2017) worth US$4.3 billion (down from US$8.8 billion in 2017). More detailed discussion of foreign direct investment into Korea can be found in Section IV.

ii GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

Acquisitions of private companies in Korea are primarily governed by the Korean Commercial Code (KCC), the Financial Investment Services and Capital Markets Act (Capital Markets Act) and the Monopoly Regulation and Fair Trade Act (MRFTA).

The KCC contains the main rules of corporate structure and governance, including requirements for, and limits on, mergers, share acquisitions, spin-offs and asset transfers. As such, the KCC will influence the transaction structure, and dictate corporate approval requirements, for both public and private companies. The KCC also governs directors' fiduciary duties, regulations on self-dealing and other corporate conflicts of interest.

The Capital Markets Act applies to public companies listed on the Korea Exchange (KRX), which includes the KOSPI, KOSDAQ and KONEX markets. The Capital Markets Act imposes disclosure requirements and other restrictions on trading in KRX-listed shares. It also prescribes rules for tender offers. Further, M&A deals involving public companies are subject to KRX disclosure rules and scrutiny by the Financial Supervisory Service (FSS), the enforcement arm of the Financial Supervisory Commission (FSC). FSC, through FSS, generally administers the financial, banking and securities system in Korea.

Under the MRFTA, which is the main antitrust statute, acquisitions and other combinations involving companies satisfying certain revenue and assets thresholds will require antitrust review by the Korea Fair Trade Commission (KFTC).

The Foreign Investment Promotion Act and Foreign Exchange Transactions Act govern foreign direct investments and foreign exchange transactions involving foreign investors in Korea. Foreign investments generally require a report to a foreign exchange bank, which is in most cases a formality, and acceptance of the report is usually granted within a few days.

While foreign investors are in principle not prohibited from acquiring shares in a Korean company, there are prohibitions or limits on foreign ownership in Korean companies engaging in certain industries considered to be vital to the national interest, such as defence, broadcasting, telecommunications, publishing and public utilities.

iii DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND
THEIR IMPACT

i Amendments to the KCC

Major amendments to the KCC were passed on 1 December 2015, and came into effect on 2 March 2016. The amendments were drafted with the explicit intention of invigorating the Korean M&A market by enabling the use of M&A structures previously unavailable in Korea.

The KCC amendments provide for triangular share swaps, reverse triangular mergers and triangular spin-off mergers. Under those structures, parent company shares can be offered as consideration. Specifically, parent company shares of the acquiring company are provided as consideration to target company shareholders in a triangular share swap or a reverse triangular merger, and parent company shares are provided to spun-off subsidiary company shareholders under a triangular spin-off merger. Those amendments are expected to facilitate more flexibility in M&A transactions by enabling cash-free mergers, as well as opening up new possibilities for structuring cross-border M&A transactions involving entities in overseas jurisdictions.

Further, the KCC amendments relax the threshold for small-scale share swaps (which can be approved by the board of directors, instead of the more onerous requirement of shareholder approval) from 5 per cent of total issued and outstanding shares to 10 per cent of total issued and outstanding shares.

Finally, the KCC amendments introduce the simplified business or asset transfer, where a transfer can be approved by a board of directors' resolution if the counterparty to a transaction owns over 90 per cent of the transferring company's shares.

ii Recent amendments to the Capital Markets Act

Amendments to the Capital Markets Act came into effect on 1 May 2018 to tighten the disclosure obligations for shareholding dilution. Before the amendments, if a listed company offered new shares other than by way of pro rata subscription by existing shareholders, entailing dilution of existing shareholders, an exemption from the usual requirement of two weeks' prior notice under the KCC applied, which meant that most shareholders discovered the dilution after the fact. Under the amended Capital Markets Act, disclosure is required at least one week before the payment date in respect of the subscription price.

Before its expiration in 2018 due to the sunset clause in the Capital Markets Act, the Korea Securities Depository (KSD) was allowed to exercise the unused voting rights of the shares deposited in the KSD mirroring the actual votes exercised at the general shareholders' meetings of listed companies. This shadow voting was allowed because minority shareholders usually did not attend general shareholders' meetings, and it was a common occurrence that the quorum of 25 per cent of the issued and outstanding shares (required under the KCC) could not be satisfied. The difficulty in achieving a quorum is more serious in relation to the appointment of statutory auditors, as each shareholder's voting right for the appointment of a statutory auditor is limited to 3 per cent, and even if the controlling shareholder holds more than 25 per cent of the shares, the quorum can only be satisfied if other minority shareholders exercise their rights to surpass the quorum threshold of 25 per cent. Yungjin Pharmaceuticals, a KRX-listed company, was actually unable to appoint its statutory auditor at its 2018 annual general shareholders' meeting as only 9 per cent (out of minority holdings of 47.55 per cent) of its minority shareholders attended, and the quorum for appointing its statutory auditor could not be satisfied. Currently, the solutions being discussed for this issue are to introduce an electronic voting system for general shareholders' meetings to facilitate minority shareholder participation, and to have companies more actively court minority shareholders to participate or grant proxies.

iii Recent amendments to the employment law, tax law and competition law

See Sections VII.i, VIII.i and IX.ii, respectively.

iv FOREIGN INVOLVEMENT IN M&A TRANSACTIONS

In 2017, foreign direct investment (FDI)4 into Korea reached an all-time high of US$229.4 billion (a 7.7 per cent increase from 2016), and FDI into Korea surpassed US$200 billion in each year during the three-year period from 2015 to 2017.5 However, in 2018, global economic uncertainty, in addition to soft economic conditions in certain countries that are major sources of inbound investment, led to a decrease in the number and value of inbound M&A deals, and while FDI figures for 2018 had not been compiled at the time of publication, FDI is also expected to show a decline.

Among the total FDI amount for 2017 above, which includes both M&A investments and follow-up investments by foreign investors in Korea, FDI by way of M&A was US$72.4 billion (a 15.4 per cent increase from 2016, on the basis of publicly filed information).

As of June 2017 (half year basis), the major countries investing into Korea were as follows:6

Ranking Country Investment amount (US$ milllion)
1 United States 2,446
2 Singapore 1,181
3 Hong Kong 1,152
4 Japan 819
5 Philippines 505
6 China 479
7 Netherlands 431
8 United Kingdom 390
9 Germany 347
10 Ireland 323

v SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES

i Significant transactions

Among others, notable significant transactions in the Korean M&A market announced in 2018 included the following.

Transaction Industry Deal amount (US$ milllion)
Hyundai Heavy Industries' acquisition of Daewoo Shipbuilding & Marine Engineering Shipbuilding 1,834
SK Telecom's acquisition of ADT Caps from Carlyle Group Security 2,539
Shinhan Financial Group's acquisition of Orange Life Insurance (former ING Life insurance) Life insurance 1,957
Kolmar Korea's acquisition of CJ HealthCare Pharmaceutical 1,120
Acquisition of Magna International Inc's global fluid pressure and controls by Hanon Systems Auto parts manufacturing 1,181
Acquisition of Style Nanda by L'Oreal Fashion 513

ii Key trends

One notable development in the Korean M&A market in 2017 and 2018 was the rapid growth in the participation of private equity fund (PEF) players, in comparison to more conservative activity by domestic conglomerates. Further, while PEFs in the Korean M&A market previously tended to focus on buy-outs to ensure short-term returns, PEFs are now starting to show interest in long-term investments in medium-sized firms, especially in consortium with strategic investors. Notable examples are the acquisition of Hyosung Packaging (a PET bottle company) by a Standard Chartered Private Equity consortium in partnership with Samyang Group and the acquisition of Tapex (a taping company) by an NH Investment & Securities consortium in partnership with Hansol Chemical.

Another development is the increase in carve-out transactions, where the parent company spins off a subsidiary and sells a minority stake in the spun-off subsidiary to outside investors. Korean companies are utilising carve-out structures to achieve various goals, for example, to divest non-core business and focus on core businesses or to attract investments to certain particular business divisions, and it is expected that carve-out transactions will comprise a significant portion of the Korean M&A market in 2019. One recent example of a carve-out transaction was the sale of existing shares by Kakao Corp and the issuance of new shares by Kakao Mobility, which had been established by Kakao Corp by way of an in-kind contribution of its Kakao Taxi and other auto-related businesses to a consortium led by TPG. With the new capital raised from the consortium, Kakao Corp and Kakao Mobility strengthened their position to develop and launch new premium taxi app services.

Finally, inbound transactions in 2018 showed a volume decrease of 48 per cent compared to 2017, with an aggregate value of US$4.3 billion over 37 transactions. Notable inbound transactions in 2018 included Hillhouse Capital, Sequoia Capital and Singapore sovereign wealth fund GIC's equity investment in Baedal Minjok, Korea's leading food delivery service company (US$308 million).

iii Hot industries

According to the KFTC's 2018 M&A Review, in order to enhance the competitiveness of existing businesses as well as to build an engine for future growth, mega-sized M&A transactions in the subscription broadcasting services, video game, and shipbuilding industries are expected in 2019.

vi FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS

i Leveraged buyouts

Korean statutory law and court precedents prohibit certain forms of leveraged buyout (LBO) as illegal asset-stripping, and a clear-cut standard on whether a given financing structure is permissible for a given transaction structure has not been provided to date.

Based on recent court precedents, it is generally understood that LBO financing structures that directly utilise the target company's assets as collateral are likely to be prohibited. However, a 2015 Korean Supreme Court judgment7 ruled that an LBO that involved establishing security on target company assets can be allowed considering, among other things, that:

  1. the acquiring company acquired 100 per cent of the target company, and as such no minority shareholders were harmed by the transaction;
  2. a critical portion of the funding for the transaction (approximately 43 per cent) was supplied by the acquirer;
  3. the acquiring company was not a paper company, but a listed company with substantive assets; and
  4. there was no substantive or procedural defect in the merger following the acquisition.

While this judgment does not seem to rule that LBO financing structures that utilise a target company's assets as collateral are generally allowed, it can be seen that in certain cases such financing structures are permissible, depending on the entirety of the circumstances.

On the other hand, indirect LBO financing in cases where the acquiring company (which borrowed the purchase price) is merged with the target company, or the target company provides funding to the acquiring vehicle by capital reduction, are likely allowed, assuming that the necessary corporate approvals and procedures are obtained and observed.

Overall, LBO financing is being used more often in the Korean M&A market compared with previous years.

ii Total return swaps

A total return swap (TRS) is an instrument under which the total return payer (who will acquire a partial stake in the target company) agrees to pay the total return recipient the increase in the value of the stake, dividends, or both, derived from the stake; and in exchange, the total return recipient agrees to pay a fixed fee to the total return payer, any decrease in the value of the stake, or both.

Although it is arguable whether a TRS constitutes a true sale, M&A transactions utilising the TRS are being seen more commonly in the Korean M&A market. For the acquisition of KT Rental in 2015, Lotte Group financed approximately US$290 million (out of a total purchase price of US$1.1 billion) using the TRS structure.

vii EMPLOYMENT LAW

i Recent amendments to the employment law

Nearly four years after revisions to the law were first proposed, the Korean National Assembly passed a bill on 28 February 2018 to amend the Labour Standards Act (LSA) to reduce Korea's maximum weekly working hours. The law reduces the maximum weekly working hours from 68 hours per week to 52. The law became effective on 1 July 2018. It currently applies to large companies, and will be rolled out in stages to smaller companies. Employers who fail to comply with this new law will be subject to criminal penalties of imprisonment for up to two years or a fine of up to 20 million won.

Reviewing the working conditions of target companies for compliance with the mandatory working hour regulations has become a routine part of due diligence.

ii Recent court decision

In Korea, the Act on the Protection of Dispatched Workers (Dispatched Workers Act) regulates the use of employees of another company by way of worker dispatch. Under the Dispatched Workers Act, worker dispatch refers to a system in which a dispatching company, while maintaining the employment relationship with its employee, causes its employee to work for another company under the supervision and direction of the receiving company in accordance with a dispatch agreement between the two companies.

Outsourcing is similar to worker dispatch in that the receiving company uses the employees of the outsourcing company for the work of the receiving company. However, there is a general distinction between outsourcing of work, which is not subject to the Dispatched Workers Act, and worker dispatch regulated under the Dispatched Workers Act, based on whether the employee is supervised or controlled by his or her own employer or the receiving company. If the employee is supervised or controlled directly by the receiving company for the performance of his or her work, he or she will be regarded as a dispatched worker under the Dispatched Workers Act.

In September 2017, as a result of a labour inspection conducted by the Ministry of Employment and Labour (MOEL), MOEL discovered that Paris Baguette had been retaining bakers at its franchise stores via illegal worker dispatch, and ordered Paris Baguette to directly hire 5,378 bakers. MOEL regarded Paris Baguette as a receiving company under the Dispatched Workers Act in relation to the bakers principally on the grounds that, among other things, Paris Baguette established and put into place uniform criteria for general management of personnel matters, including recruitment, promotion, evaluation and wage levels of bakers; and Paris Baguette's quality manager managed the attendance time of bakers and generally supervised and directed the bakers in their duties. Moving forward, there is a strong possibility that MOEL will use the criteria applied in its determination of the Paris Baguette case to assess alleged cases of illegal worker dispatch in transaction structures similar to the above case.

In this regard, based on the foregoing, when entering into M&A transactions, buyers will need to confirm whether target companies are in compliance with the Dispatched Workers Act to avoid being ordered to hire any unexpected additional employees on a permanent basis after closing a transaction.

viii TAX LAW

i Recent amendments to the tax law

The key features of the recent amendments to tax laws are as follows.

Relief from VAT for business transfers

Under the current law, a comprehensive business transfer is not subject to value-added tax (VAT). Where only selected assets or liabilities are transferred, the transaction is classified as an asset transfer and the transferor is required to issue valid VAT invoices and file a VAT return. However, from a practical standpoint, it is actually difficult for taxpayers to determine whether a transaction is a comprehensive business transfer or an asset transfer. There was a risk that input VAT would not be refundable if a transaction was treated by the parties as an asset transfer at the initial stage of the transaction and later was determined to be a comprehensive business transfer by tax authorities. Therefore, taxpayers had to obtain a ruling from the tax authorities to gain certainty as to the type of transaction. According to the amended tax laws, which became effective on 1 January 2014, a transferee is allowed to credit the input VAT on a proxy basis when VAT is paid to the relevant tax authorities by the 10th day of the following month after completion of the transaction.

Addition of employment succession requirements to satisfy tax-free merger and
demerger conditions

Under the former law, a merger or demerger would be treated as tax-free if certain requirements, such as business purpose, continuity of interest and continuity of business, were met. Amendments to the tax law effective on 19 December 2017 impose the continuity of employment requirement as an additional condition for the tax-free treatment of a merger or demerger. Under the new requirement, 80 per cent or more of the employees of the transferred business must continue to be employed by the surviving entity until the end of the fiscal year during which a merger or demerger is registered.

However, a tax-free merger or demerger may become taxable upon the occurrence of certain trigger events within three years from the end of the fiscal year during which the merger or demerger is registered. The trigger events include discontinuity of interest and discontinuity of business. The revised tax law added discontinuity of employment as a new trigger event. To maintain a tax-free merger, the total number of employees of the surviving entity must be 80 per cent or more of the combined total number of employees of both entities. Similarly, to maintain a tax-free demerger, the total number of the spun-off entity's employees must be 80 per cent or more of the total number of those of the pre-demerger spun-off business.

Relief from tax-free in-kind contribution requirements

Previously, corporate income tax on capital gains arising from qualified in-kind contributions was deferred if all of the following conditions were met:

  1. the investing company is engaged in the business for five years or more;
  2. the investing company owns 80 per cent or more of the shares in the invested company, and continues to hold such shares until the end of the year in which the in-kind contribution is made;
  3. the invested company carries on the transferred business until the year end; and
  4. a separate and independent business division is transferred to the invested company.

It was not regarded as a transfer of a separate and independent business division if the investing company contributed only certain holding stocks and related assets and liabilities to the invested company.

The tax law as amended on 19 December 2017 abolished the fourth requirement with a view to facilitating corporate restructuring. On or after 1 January 2018, the tax-free in-kind contribution requirements will be met even if a investing company only contributes stocks, if the other three requirements are met.

Expansion of tax-free merger incentives

Under the former law, a vertical merger between a parent company and its 100 per cent-owned subsidiary was considered a tax-free merger without having to satisfy any further conditions. According to the tax law as amended on 19 December 2017, in addition, a horizontal merger between brother–sister entities that are 100 per cent held by the same parent company will be eligible for tax-free treatment without the need to satisfy any further conditions on or after 1 January 2018.

Capital gains tax on the transfer of small and medium-sized enterprise shares by
major shareholders

Capital gains tax on the transfer of shares in small and medium-sized enterprises (SMEs) was previously imposed at 10 per cent, irrespective of the size of the shareholder's stake. The tax law as revised on 15 December 2015 increases the capital gains tax rate on the transfer of SME shares owned by major shareholders from 10 to 20 per cent on or after 1 January 2016.

The original 2018 tax reform proposal included an increase in the tax rate from 20 to 25 per cent on the tax base exceeding 300 million won for capital gains earned by a large shareholder, which would be effective for share transfers from 1 January 2018. Under the bill approved in 2018, the application of the increased tax rate will be postponed until 1 January 2020 for the transfer of shares in SMEs. This trend of increase in the capital gains tax rate on the transfer of SME shares has led to an increase in M&A activity among private companies since 2018.

ii Recent court decision

In a recent case with respect to a share transfer, the Supreme Court decided in a recent case that cash bonus compensation (an M&A bonus) to employees of an acquired company should be an expense borne by the acquired company rather than the buyer of the acquired company. The acquired company paid an M&A bonus to its employees and deducted the M&A bonus in its corporate income tax return. However, the tax authorities denied deductibility of the M&A bonus on the basis of their assertion that the M&A bonus should have been an expense borne by the buyer of the acquired company's shares as opposed to the acquired company itself.

The Supreme Court held that there was a reasonable basis for the acquired company to pay the M&A bonus considering the fact that the M&A bonus was paid to employees who served the acquired company, that the amount of the M&A bonus was reasonably decided in consideration of the operating income of the year, and that it was not out of the ordinary course of business for the acquired company to pay compensation to its employees to prevent or terminate strikes.

ix COMPETITION LAW

i Overview

According to the KFTC, companies notified the KFTC of 702 reportable transactions during 2018, which is a slight increase over the 668 transactions notified in 2017. The KFTC challenged and conditionally approved only two transactions in efforts to protect competition in industrial sectors including telecommunications (Qualcomm/NXP) and industrial gases (Linde/Praxair).

ii Recent amendments to the competition law

During 2017, there were a couple of notable regulatory changes in the context of Korea's merger control: an increase in the jurisdictional thresholds, and a curtailment of the review period for a transaction that is judged under a voluntary prior consultation as one that is unlikely to raise competitive concern. Additionally, in 2019, the KFTC has revised its merger filing guidelines to take into account information assets (including big data) and specialised merger review standards for digital economy companies (in which the criteria applied by the KFTC for the purpose of defining the relevant market are tailored for such companies).

The KFTC announced in October 2017 increased jurisdictional thresholds for merger notification under the MRFTA. Under the previous merger notification regime, a transaction was required to be reported if a party to the transaction incurred global revenue (or possessed global assets) of at least 200 billion won in the preceding fiscal year and the other party to the transaction had global revenue (or possessed global assets) of at least 20 billion won. These threshold amounts were increased to 300 billion won and 30 billion won respectively and came into force on 19 October 2017. Transactions entered into after 19 October 2017 are subject to the new thresholds. On the other hand, the domestic revenue threshold for foreign-to-foreign mergers, which refer to M&A involving non-Korean companies, has increased as well. For a foreign-to-foreign merger to be reportable, a foreign company involved in the foreign-to-foreign merger is required to have generated sales in or into Korea of at least 30 billion won in the preceding fiscal year in addition to satisfaction of the global revenue and asset thresholds noted above. Prior to the amendment to the MRFTA, the figure was 20 billion won. According to the KFTC's 2017 M&A Review, the increased thresholds would likely reduce the number of merger notifications to the KFTC by 50 cases per year.

The other noteworthy change to Korea's merger control law is an extension of the scope of the simplified review procedure. The benefits of the simplified review procedure, a short-form notification and a shorter waiting period (15 calendar days), have been extended to transactions that are evaluated under a voluntary prior consultation as competitively neutral transactions or transactions where procompetitive effects outweigh anticompetitive effects. The MRFTA allows the parties contemplating a potentially reportable transaction to request the KFTC's preliminary or prior review even before signing a preliminary agreement in respect of the transaction. This voluntary prior consultation is often used to prevent unnecessary delay in merger review after a formal notification is submitted later following execution of a definitive agreement. In practice, if no competitive concern is found in the voluntary prior consultation, the proposed transaction usually passes the formal merger review without difficulty unless substantial changes are made to the deal structure that was notified to the KFTC in the voluntary prior consultation. However, in the past, the notifying party or parties still had to file a full-length notification for the subsequent formal merger review, which is a lengthy form that requires a significant amount of corporate and market data, and were obliged to wait 30 calendar days until the receipt of the KFTC's final approval (although early approval was sometimes granted). Thus, the amendment to the MRFTA has established a consistent procedural approach to transactions that are not likely to raise competitive concerns.

iii Contemplated changes in the competition law

Apart from changes to the jurisdictional thresholds, the KTFC is contemplating an additional notification threshold for unicorn deals. The current approach is relatively straightforward but may not cover transactions involving highly valuable start-ups, which at the time of a transaction may not have significant revenues or assets meeting the thresholds, but whose deal valuation is relatively high in anticipation of its potential importance in the markets (unicorn start-ups). The United States, Austria, and Germany are a few countries that have introduced transaction-value-based thresholds. If adopted, the size-of-transaction test would intensify competition law enforcement in the era of the digital economy. However, this proposal is still under consideration and open for further discussion.

In addition, the KFTC appears to be considering the role of big data in merger review. On 30 January 2018, the KFTC responded in its testimony to the Congressional Special Committee for the Fourth Industrial Revolution that it will be mindful of likely adverse impacts on innovation in connection with its merger review of transactions in the big data-driven market. No indication of drastic changes to the analytical approach to competition issues regarding big data has been observed, but the KFTC has clearly voiced in its testimony that a company may be found to have dominant market power due to its ownership of and control over valuable data in spite of a low market share. Much has been said about big data-related theories of harm. The KFTC seems to be concerned that control over big data can create barriers to entry in particular in a situation where a company holds a unique dataset that cannot be replicated by its competitors without incurring substantial time and cost. Thus, the KFTC is likely to actively monitor big data's impact on fostering competition in relevant markets.

x OUTLOOK

In 2019, considering the relatively moderate growth of the Korean economy (2.6 per cent real GDP growth forecast8) and the global economy (3.3 per cent GDP growth forecast9), it is anticipated that the Korean domestic M&A market, as well as inbound and outbound M&A activity, will be stable throughout 2019. However, continued geopolitical uncertainties, potential global trade wars and increased government regulation may reduce M&A activity.

For the domestic M&A market, it is expected that PEFs will continue their active participation in the market, fuelled by plentiful liquidity, and carve-out transactions by companies seeking to strengthen their core business areas will increase. For the inbound and outbound markets, a general global recovery is expected to contribute to increased M&A activity, but considering the Korean economy's global connectedness, the Korean M&A market will be highly exposed to global economic and regulatory risks.


Footnotes

1 Ho Kyung Chang is a partner, Alan Peum Joo Lee is an associate and Robert Dooley is a foreign attorney at Bae, Kim & Lee LLC. The authors would like to thank their colleagues Ben Gu, Namwoo Kim and Eun Hong Lee for their significant assistance in preparing this chapter.

2 Thomson Reuters, Merger & Acquisitions Review Full Year 2018.

3 References to M&A activity in this chapter are based on the deals notified to the Korea Fair Trade Commission (KFTC) during 2018, and reported in the press release issued by the KFTC on 5 March 2019 providing merger notification data for fiscal year 2018 (KFTC's 2018 M&A Review).

4 In this context, FDI means the investment by foreign individuals or entities into Korean entities of more than 100 million won and representing 10% or more of the voting shares of the Korean entity.

5 Korea Trade-Investment Promotion Agency Foreign Investment Ombudsman Annual Report 2017.

6 Ministry of Trade, Industry and Energy and Korea Trade-Investment Promotion Agency, foreign direct investment reference data, September 2017.

7 Korean Supreme Court, 12 March 2015, 2012Do148 judgment.

8 Bank of Korea forecast, January 2019.

9 IMF World Economic Outlook, April 2019. Projected at 3.7 per cent in January 2018, reduced to 3.5 per cent in January 2019, then adjusted again in April 2019.