SK Group has enlisted Boston Consulting Group (BCG) to evaluate its M&A deals, reportedly making top executives at the conglomerate particularly anxious. This move is part of a broader strategic review initiated by Chey Chang-won, chairman of the SK Supex Council, the conglomerate’s top decision-making body. Chey believes that the performance of the companies SK Group has actively invested in or purchased over the past few years has fallen short of expectations.
A two-person team from BCG has been tasked with reviewing SK Group’s entire business portfolio since last month, according to sources in South Korea’s investment banking industry on Mar. 25. Chairman Chey is looking to overhaul SK Group’s investment portfolio based on the insights from this consultancy. BCG is expected to announce the results next month.
Chey’s appointment as SK Supex Council chairman was accompanied by a management reshuffle involving four vice-chairpersons stepping back into secondary roles. The outcome of the BCG consultancy might lead to another round of leadership changes within SK Group. Depending on the review results, the group’s focus could shift towards divesting assets rather than pursuing new investments, according to people familiar with the matter.
SK Group has expanded its portfolio to include semiconductors, batteries and biotech investments since 2016. The group acquired SK Siltron for $462 million (62 billion won) in 2017, conducted large-scale investment in electric vehicle (EV) batteries in 2018, acquired SK Nexilis for 1.19 trillion won in 2020 and purchased Intel’s NAND division for 11 trillion won in 2021. SK Group’s joint venture with U.S. carmaker Ford in BlueOval SK also represents an investment of over 5 trillion won.
“SK has been investing aggressively, but we anticipate that following this consultation, the pathway will be cleared, leading to a series of SK-related listings to emerge one after the other,” said an investment banking insider. Another noted, “SK is facing significant financial pressure, having divested all of its profitable fossil fuel ventures and sequentially acquiring several high-cost new businesses.”
People familiar with the situation at SK and BCG revealed that BCG identified three to four problems with SK Group’s M&A activities. The most critical concern is that many acquisitions were made in a rush and at a relatively high price relative to the enterprise value.
SK Ecoplant, formerly known as SK E&C, is a prime example. The company attempted, in haste, to transition from a traditional construction business to a so-called “green company” to enhance its corporate value. To achieve this goal, SK Ecoplant has channeled over 3 trillion won in eco-friendly companies such as Environment Management Corporation, a leading domestic environmental platform, and TES, a recycler of electronic waste, and projects related to solar energy, offshore wind, waste battery recycling, and green hydrogen.
SK Square, an intermediate holding company, is in a similar situation. The company has been struggling to recoup its investments from high-cost acquisitions.
“The review is limited to a few affiliates, not the entire group,” said an SK Group representative.
