Why the Grab-GoTo merger is likely a no-go

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Hello reader,

“We make peace with our enemies, not our friends.” — Tyrion Lannister.

My favorite Game of Thrones character didn’t have a merger between two of Southeast Asia’s biggest tech players in mind when he uttered that line, but it still contains some pearls of wisdom for Grab and GoTo watchers.

In some aspects, joining forces makes sense for these competitors. After all, they operate in the same sectors and would save a lot of money by not duking it out for market share.

However, there’s a big hurdle to establishing peace between opponents: One side has to lose out first, forcing it to the negotiating table.

As today’s premium story explores, neither GoTo nor Grab appears to be in a position where they desperately need a merger. We may still see these two rivals locked in battle for years to come.

Today we look at:

• Why Grab and GoTo may be better off apart
• Shopee’s alleged monopolistic practices in Indonesia
• Other newsy highlights such as TikTok Shop still facing regulatory scrutiny in Indonesia and Wavemaker Partners approaching the close of its fifth fund

Premium summary

Grab and GoTo: far from a match made in heaven

Image credit: Timmy Loen

Regional tech giants Grab and GoTo are reportedly in merger talks yet again, but how realistic is it to think such a deal could be pulled off?

It’s fun to speculate on blockbuster deals, but regulatory concerns, the firms’ financial positions, and the sheer complexity of such a transaction make for long odds that a merger materializes.

• Management in favor?: Recent personnel developments do boost the chances of a merger. Gojek co-founder Kevin Aluwi left GoTo’s board of commissioners last year, making him the last of Gojek’s three co-founders to exit. The new CEO, Patrick Walujo, has not shied away from decisive moves to improve GoTo’s prospects.. GoTo gave up its controlling stake in Tokopedia as part of its merger with TikTok Shop, indicating that Walujo can make bold decisions and leave sentimentality off the table.
• Lack of urgency: Grab and Gojek’s respective cash positions improved in the third quarter of 2023, so neither may be in a rush to complete a deal. Both recorded quarters with positive adjusted EBITDA – Grab in Q3 2023 and GoTo in the fourth quarter of the same year. Nailul Huda, director of digital economy at the Center of Economic and Law Studies, believes that a merger between the two players “will not happen in the next one or two years” due to their cash positions.
• Regulatory minefield: Given that both firms are market leaders across Southeast Asia, getting the green light from competition watchdogs would be tough. The merged entity would dominate ride-sharing in Indonesia as well as the food delivery market. The Indonesian Competition Commission (KPPU) already warned that a merger could lead to monopolistic practices in certain sectors. Grab is already under review by the Competition and Consumer Commission of Singapore for its acquisition of taxi company Trans-cab. A GoTo-Grab merger would surely attract even more scrutiny in the city-state,

A Shopee monopoly?

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