M&A consulting becomes No. 1 source of profit in financial market

The size of the M&A advisory market has been growing fast in Korea during the past few years, taking up the largest proportion of annual financial consulting services in the country. The weight of corporate bond offerings, which used to be a key source of profit for the local investment banking (IB) sector until just a few years ago, has been visibly decreasing.

According to data by financial information platform Dealogic, M&A advisory services accounted for about 40 percent, or 317.3 billion won ($243 million), of the entire size of last year’s financial advisory market in Korea, which stood at around 797.5 billion won.

In last year’s figures, advisory services for the equity capital market (ECM) accounted for 29 percent, or 228.5 billion won, while the debt capital market (DCM) advisory took up 25 percent. The ECM division covers a range of corporate finance activities, including IPOs, private equity placements, as well as the issuance of convertible or exchangeable bonds (CB or EB). The DCM division mostly handles corporate bond issuance, raising capital through selling such debts to investors.

In 2017, the weight of M&A advisory services was the lowest among the three main IB divisions, accounting for about 21 percent of the total of the annual local financial advisory markets. DCM advisory took up the largest portion of 40 percent, while the ECM held about 33 percent.

While the annual entire advisory market size in Korea grew by about 36 percent during the six years from 582.6 billion won to 797.5 billion won in 2022, the M&A advisory sector grew more than 260 percent from 120.8 billion won in 2017 to 317.3 billion won during the same period. The size of the DCM shrank from 2017’s 231.9 billion won to 201 billion won in 2022.

Market watchers see the changed pattern as a strengthening of the local capital market in terms of stability and flexibility. Corporations seem to be adjusting to changing external economic factors through active and frequent M&A deals between themselves, or between corporations and private equity firms. The ECM’s solid growth over the years also shows the local capital market’s increased capacity to attract new investments.