Kakao is known to be considering acquiring Nexon, a major game company.
Attention is also focusing on how Kakao, a relatively small company, will secure funds to take over Nexon.
Tencent, a Chinese game company, and KKR, Carlyle and MBK Partners are among the companies currently considering acquiring Nexon.
If Kakao is to compete among global companies and large capital groups, it is highly likely that it will either join with strategic investors or take over shares through a consortium with private equity funds.
Kakao's market capitalization is only 8.3 trillion won, making it difficult to raise funds to acquire Nexon, which is worth more than 10 trillion won.
If Kakao makes a strategy to actively participate in the acquisition of Nexon, it is highly likely that it will raise funds through cash assets, short-term loans, bond issuance and capital increase.
Currently, it is heard that Kakao's current assets that can be converted within one year are worth 1.5 trillion won.
Another scenario is that Kakao will hand over its stake in Kakao or Kakao Games to Tensente, the second largest shareholder of Kakao, and attract investment.
This will allow Kakao to see the development power of Nexon and effect of its distribution platform, and will also strengthen its partnership with Tencent.
Tencent is currently the second largest shareholder with 6.7 percent of Kakao shares, and it also invested 50 billion won in Kakao Games through its subsidiary and has a 6 percent stake.
If Kakao`s acquisition of Nexon takes place, it will be the largest M&A among Korean IT companies.
Kakao can expect synergistic effects such as applying Nexon's various contents to major services such as Kakao Talk.
In particular, Kakao has focused on publishing rather than developing its own subsidiary. If Kakao acquires Nexon, it is highly likely that it will absorb its own development team and introduce a new game named Kakao Games.
"We are considering various measures to prevent Nexon from being sold to other countries," a Kakao official said.