Business media reports indicate that Kakao Entertainment has entered the final stages of an M&A (merger & acquisition) with SM Entertainment. 

According to business insiders, negotiations between Kakao and SM for an M&A are progressing smoothly. The framework for the M&A was drawn up at the beginning of this month, and the two sides are currently negotiating more specific details. It's projected that the M&A will consist of Kakao Entertainment acquiring both existing and new shares in SM Entertainment. 

Initially, the sales offer put forward by SM Entertainment's head producer Lee Soo Man consisted of 18.53% of the agency's total shares. However, in order to secure exclusive management rights, industry insiders believe that Kakao must "take ahold of at least 1/3 of the total shares." 

As a result, it's predicted that SM Entertainment will be handing over approximately 33% of shares during its M&A with Kakao. The figure is notable as it will play a key role in minimizing any restrictions or limitations to Kakao's exclusive management rights. Acquiring 33% of SM Entertainment's total shares will allow Kakao to bypass most decisions which require a vote by the board of shareholders, particularly in special resolution areas such as policy changes, appointment of key officers, etc. 

Meanwhile, Kakao Entertainment, which announced a merger with music streaming service Melon in June of 2021, is seeking to increase its net worth prior to its IPO. 

According to business insiders, Kakao Entertainment's first business endeavor after its merger with SM Entertainment will be the launch of its very own OTT (over-the-top) media service, featuring exclusive content offered by SM Entertainment artists. The OTT platform will be joining competitors currently providing streaming services in South Korea, such as Netflix, Watcha, Wavve, Coupang Play, and Disney+.