Chairman Bang Si-hyuk of HYBE reveals reasons for discontinuing SM acquisition

HYBE Chairman Bang Si-hyuk revealed the reason for the suspension of the acquisition of SM Entertainment.

On the morning of the 15th, the “HYBE Bang Si-hyuk Invitational Kwan-hoon Forum” was held at the Seoul Press Center International Conference Hall.

He said, “I somehow became a representative of K-POP and came to hold a microphone in a place like this, but in reality, I am a composer who loves music and never thought that I would directly do business. Until a year before founding the company, I always declared to my boss and closest friend, Park Jin-young (J.Y. Park), that I would never do business no matter what.”

He also added, “Despite that, I founded BIG HIT Entertainment and have been in business for 18 years. Being the chairman of the entertainment company with the highest market capitalization in Korea, I think life is truly unpredictable.”

Chairman Bang said, “I have always wanted to pursue music for a long time. However, composers are essentially freelancers, so it’s not something that can be done just because you want to do it. I started the company with the impure intention of creating a company that would continue to employ me even as I got older. I also realized that even if I were no longer with this company, I should be working hard to prepare for the next person after me, so that there would be no vacant position, even five or ten years later. The fact that we have trained many producers and creators within the company and established a multi-label system is the result of that effort.”

He also talked about his recent attempt to acquire SM Entertainment and why it was suspended. On February 10th, HYBE acquired a 14.8% stake in SM Entertainment, which was the largest shareholder of SM, but waged a fierce battle against SM’s current management team led by co-representatives Lee Sung-soo and Tak Young-jun, and strategic partner Kakao Entertainment. On March 12th, HYBE announced that it would suspend the acquisition of SM after considering various internal and external factors.

When asked about the acquisition and suspension of SM, Chairman Bang laughed and said, “Of course, I thought I would be asked about it, but I didn’t expect it to be the first question.”

He said, “HYBE began considering the acquisition of SM around 2019, which I think you have all heard as a rumor. We had already quietly made an offer at that time, but it did not become a news article and remained at the rumor stage. It is also true that we were rejected twice. There were pros and cons within the company. The pros believed that we needed to expand the scale of K-POP as a driving force for global growth, which we also publicly discussed, while the cons believed that we should use that money in a more futuristic and innovative way in the global market.”

Among these circumstances, there was a sudden contact from former SM Entertainment producer Lee Soo-man and a change in strategy as a trigger for the acquisition. Chairman Bang Shi-hyuk explained, “A better opportunity came to us in the middle of last year. We had another chance to acquire [SM], and I thought as the chairman, I wanted to be more future-oriented. I wasn’t sure if we absolutely needed to acquire SM. Then, there was a sudden contact from former SM Entertainment producer Lee Soo-man, who asked about our interest in purchasing shares. There was a short discussion internally, but many elements that had previously opposed the acquisition had disappeared, and we decided that we could acquire [the shares] now. We thought we could peacefully acquire the shares owned by Lee Soo-man.”

He also stated, “After that, the market heated up, and the fierce acquisition battle was more than we expected. We had been thinking about SM for a long time, and we knew there was a clear value, but at one point, we thought it exceeded that value. That’s when we started to worry. We debated until the end whether we should acquire [SM]. We concluded that it wasn’t right to enter a war to the extent that it would damage the value of HYBE’s shareholders and shake up the market.”

He also added, “In terms of the cost of acquisition, from an external perspective, only numbers are visible, but from the perspective of the buyer, the tangible and intangible costs of acquisition are much greater. During the process of corporate integration, a lot of time and effort, as well as emotional labor from members, are necessary. Therefore, we judged that it is not right to choose acquisition considering these factors. We made a decision to invest more in innovative companies and move forward globally as originally planned.”

There is also a calm evaluation that HYBE may have completely lost the acquisition battle with Kakao. Chairman Bang Shi-hyuk said, “BoA had her 20th-anniversary concert last weekend. First of all, I want to say congratulations. It is a fact that the agency has played a very significant role in leading K-pop to this point. However, no one can deny that it is the artists who have been at the center of the business, fulfilling their work and leading the industry.”

He said, “In fact, amidst the exciting discussions about the acquisition, which people see as a war, artists faithfully performed their work in anxiety, and fans supported the artists on the spot. Both Kakao and we wanted to provide a better environment for the artists, but I think we couldn’t consider K-pop, artists, and fans in the actual process.”

He also said, “Personally, I didn’t think of the acquisition itself as a war, so I didn’t have a headache about it, but as someone in management…”