It’s well-known that Qualcomm’s proposed acquisition of NXP is facing continued blocks from the Chinese regulatory authorities, but what may have escaped your notice is that the deal has also required approval by Korean regulators.
The acquisition — regardless of whether it goes through in the end — underlines a vital point about Korean competition law which could easily trip up international companies on the acquisition trail.
As the Qualcomm/NXP deal would be a marriage of two big semiconductor players, it would have major implications for Korean customers including Samsung and LG. The Korea Fair Trade Commission (KFTC) has given its approval — but on condition that the companies grant standard essential patents for their near-field communication (NFC) technologies and charge no additional royalties on MIFARE chips in Korea.
The point here is neither company is Korean: Qualcomm is US-based and NXP is Dutch.
It would be natural for North American, European and other international companies to progress global merger talks without too much focus on what they mean in Korea. But this could be a costly, disruptive oversight.
The crucial factor is Korea has an unusually low merger approval threshold.
If merging parties have combined annual revenues in Korea of at least KRW 20 billion (US $18.6m), Korean competition law says the deal needs approval. This falls far short of, for example, the EU Commission’s threshold of €100 million per company.
With Korean revenues of over KRW 5 trillion (US$4.67bn), a Qualcomm/NPX merger would easily exceed the country’s threshold, but many far smaller deals could also find themselves under the microscope.
On top of this, Korea is becoming increasingly aggressive in imposing conditions on high-profile acquisitions, especially in sectors such as IT and automotive which are vital to the national economy. While the Korean regulator’s conditions on a Qualcomm/NXP merger are similar to the EU Commission’s, it could well go much further in future cases.
So, the lesson is that companies can’t drive through international mergers or acquisitions with little thought for Korea if it’s a market of any significance to them.
Be aware of the low Korean approval threshold, take expert advice and consult the Korean authorities. And do all this early to avoid any nasty surprises in late-stage acquisition negotiations.