[THE INVESTOR] The ongoing investigation into Lotte Group could deal a significant blow to Korea’s M&A market, finance industry sources say.

Lotte Group has come under scrutiny over alleged corruption that runs to the very top, effectively putting all major plans on hold. With Lotte being one of the biggest players in M&As, concerns are growing that the market will feel a major pinch. 

According to finance industry data, Lotte Group spent more than 7.6 trillion won (US$6.57 billion) to take control of 21 companies between 2010 and 2015. In comparison, Hyundai Motor Group spent 5.4 trillion won and SK Group 4.4 trillion won on acquisitions over the same period.

Korea’s market for M&As is estimated to be between 80 trillion won and 100 trillion won on an annual basis.

In terms of the amount of funds involved, Lotte’s M&As during the period account for more than 20 percent of all such deals carried out by Korea’s 30 largest conglomerates.

Lotte Group’s presence in the M&A market has been growing since current chairman Shin Dong-bin came to the fore in 2004. While his father, group’s founder Shin Kyuk-ho, took a conservative approach to management, Shin Dong-bin is viewed as an aggressive manager who sought rapid expansion through acquisitions.

After Dong-bin became closely involved with the group’s operations, Lotte has succeeded in 36 M&A actions with a combined value of about 14 trillion won.

However, with the group now under suspicion of an array of wrongdoings, major projects have come to a halt.

Immediately after the investigation began, Lotte Chemical scrapped plans to acquire US chemicals maker Axiall. In addition, with Lotte’s chief of policy Hwang Gak-kyu being singled out as a key suspect, Lotte’s plans are expected to experience further delays.

A key aide of Dong-bin, Hwang is said to have spearheaded the group’s M&A deals over the years.

By Choi He-suk (cheesuk@heraldcorp.com)