Study On Establishment Of The Most Competitive Steel Company In The World Through M&A Among POSCO, BAOSTEEL, And NIPPON STEEL

Future steel industry of the world will be mainly developed by BRICs(Brazil, Russia, India, China) nations, and Steel production capacity of the world will increase to 1.7 billion metric tons by 2015 year. For the steel market domination, Merger and Acquisition (M&A) among medium and large sized still companies will be continued. World renowned research institutes and related consulting companies like International Iron and Steel Institute(IISI), World Steel Dynamics(WSD), POSCO Research Institute(POSRI) are predicting that future trend of world steel industry is establishing of new mega steel company through global consolidation. Actually BAOSTEEL, Corus Group. TKS Group in 1990s and Arcelor Steel, Mittal Steel, JFE Steel, Arcelor-Mittal Group, Tata-Corus Group in 2000s were made by within a nation M&A and cross-border M&A.Steel industry has a strong characteristics as capital intensive, process oriented, and massive facility industry which has economic scale effects especially. In spite of importance of supplying major law material for auto, shipbuilding, home appliance and heavy industries, recent steel making companies are suffering negotiation problems with major global customers and law material - coal, iron ore, etc. - providers. Therefore, for the future survival from tough competition of world steel industry and recovering negotiation power against mega sized customers and providers, cross border M&A in Fareast Asia countries is strongly needed now. This study focused on establishment of the most competitive steel company in the world through M&A among POSCO, BAOSTEEL, and NIPPON Steel based on globalizations theory, technical gap, post merger integration(PMI), and so on.As result of analysis, possibility of M&A between POSCO and Nippon Steel(Korea and Japan) is 77 points, between POSCO and Baosteel (Korea and China) is 71 points, between Baosteel and Nippon Steel (China and Japan) is 59 points, among POSCO, Baosteel, and Nippon Steel (Korea, China, and Japan) is 33 points logically.Considering current environment of world steel industry, hostile M&A among POSCO, Baosteel, and Nippon Steel is almost impossible because of three nations' government policy and economic situations. Through previous M&A practices and experiences, strategic alliance as pre-M&A stage for negotiating power, cutting cost, fortifying competitiveness, and transferring technology will be increase in near future. In terms of M&A stages, flying geese model and strategic alliance could be used. Finally this study expects that flying geese model and strategic alliance concepts could vitalize free trade agreement (FTA) among Korea, China, and Japan.If this strong M&A among three companies can success then 85 million metric tons steel making company as 2nd big size in the world can be established in short term. For the long term effects, facilitating regional import and export of steel products, eliminating of non tariff barrier, mutual development and cooperation among POSCO, Baosteel, and Nippon steel, preparing fundamental of FTA could be possible. And these kinds of M&A could ease overflow problems of production capacity in the Chinese steel and world steel market. OECD tried to solve this overflow problems but it failed to do it because of boom situation of steel market. We can expect that consolidation of three companies could gradually solve over capacity problems through stopping operation of minor steel companies.For the successful M&A among POSCO, Baosteel, and Nippon steel, obstacles as legal regulations against M&A, cultural differences need to be processed. Furthermore, through successful implementing of global M&A deal flow of consulting companies and investment banks's model and post merger integration (PMI) the strongest consolidated steel company in the world could be established. This the most competitiveness company could help vitalizing Korea, China, and Japan's economic situations, upgrading management level of POSCO, Baosteel, Nippon steel, and mutual development among three nations. This study has a important meaning as a first research for three famous steel companies's consolidation in the world. In the near future, these results of study can be used for real M&A issue practically.Briefly, this study is organized as follows: Chapter one, introduction, including the purpose, scope and methodology of studies. Chapter two, reviews literatures about global M&A and theory. In the chapter three and four, present the empirical study on M&A in world steel industry and practical M&A among POSCO, Baosteel, and Nippon steel. Chapter five focuses on expected results on M&A among POSCO, Baosteel, and Nippon steel and practical consolidation process by global consulting firm after that, important M&A related issues which must need to be considered. The final chapter concludes the study.