Woori Bank is launching a 'productive business succession' initiative that goes beyond simple succession support to preserve employment, technological capabilities, and supply chains. With the increasing importance of financing for small and medium-sized enterprises (SMEs) under the government's productive finance policy, the bank aims to accelerate consulting and merger and acquisition (M&A) financing for these businesses.
Jung Jin-wan, CEO of Woori Bank, stated at a press conference on productive business succession on June 1 that, "In South Korea, where manufacturing plays a significant role, if the succession issues of SMEs are not resolved smoothly, large corporations will inevitably be affected. We plan to view business succession as a long-term project, managing it for at least the next 10 years, which aligns with the expansion of productive finance."
Jung predicted that stable business succession would contribute to preserving technological capabilities, maintaining employment, and stabilizing industrial supply chains. Woori Bank plans to invest a total of 3 trillion won in support of productive business succession over the next five years.
The focus on business succession comes as many SMEs approaching the retirement of their founders face challenges in this area. Among the 740 companies that Woori Bank's Business Succession Support Center has signed memorandums of understanding (MOUs) with, over 80% have annual revenues of less than 50 billion won. More than half of these companies are considering second-generation succession but lack information on related systems, such as the business inheritance tax exemption. As a result, it is estimated that 17% of companies with over 10 years of operation fail to succeed and end up closing down.
Woori Bank plans to expand its support beyond simple business succession consulting to include M&A, employee buyouts (EBO), and management buyouts (MBO). With an increasing number of cases where founders' children do not wish to take over, demand for EBOs and MBOs is expected to rise.
To achieve this, the bank's Business Succession Support Center will collaborate with Kim & Chang law firm, Samil PwC, and the Korea Technology Finance Corporation to provide tailored succession consulting to over 2,500 companies in the next five years, aiming for 500 consultations annually.
According to the Woori Financial Management Research Institute, if Woori Bank successfully supports 100 companies each year for the next five years, it could lead to significant economic impacts, including maintaining 10,000 jobs, preserving 10.7 trillion won in sales, generating 469.9 billion won in production effects, and creating 193.4 billion won in value-added effects.
Woori Bank also expects to secure new sources of commission revenue through participation in acquisition financing. The domestic M&A market currently sees about 40 trillion won in transactions annually, with around 400 deals, of which SMEs account for 80% of the number of transactions and approximately 12 trillion won in value.
Hong Seung-hwan, a partner at Samil PwC, noted, "There are over 5,000 companies that can act as strategic investors, indicating a sufficient market for acquirers. With 60% of SMEs lacking succession plans, the business succession market is expected to continue growing."
* This article has been translated by AI.
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