This Article offers an assessment of the preliminary evidence that the market for corporate
control functions as a disciplinary mechanism for poor corporate governance in Korea. It analyzes
SK Corporation’s fight against Sovereign Asset Management, contest for control over the
Hyundai Group, KT&G’s fight against Carl Icahn, and LG Group and Carlyle’s proxy contest
against Hanaro Telecom, together with relevant laws and regulations.
From 1992 to 2000, the pace of merger activity rose to unprecedented
levels. An environment of sustained economic growth
and rising stock prices facilitated transactions. Toward the end
of 2000, the economic climate shifted and merger activity in the
fourth quarter declined. The economy showed only small growth
during the first quarter of 2001. Excess capacity in a number of
industries had developed, and sales and profit disappointments
began to widen. The business cycle had returned. Valuations in
Internet companies and other high-tech industries have been
sharply revised downward.
This chapter describes the corporate finance of mergers and acquisitions. It shows that the acquisition of one firm by another is essentially a capital budgeting decision, and the NPV framework still applies. Tax, legal, and accounting aspects of mergers are discussed along with more recent developments in areas such as takeover defenses.