Is a merger between Grab and Gojek possible? 🤔

Dear Readers,

One of the things often discussed in the startup community is the intense battle between Grab and Gojek. Most people expect the companies to slug it out, where one goes big and the other goes home. The contrarians, however, see a merger between the two as an option.

On the surface, it makes business sense. Combining the two businesses could create more efficiency and cost-savings as well as optimize functions such as product, engineering, and customer service.

The combined entity can invest more resources aimed at serving users instead of focusing on competition and subsidies. The merger will be celebrated as a win for the community – a move that allows founders and management teams to put differences aside and collectively create a company of higher value and impact.

Perhaps the Didi and Kuaidi merger in 2015 could serve as a good case study. When it happened, the combined entity was valued at $6 billion. Since then, Didi’s valuation has gone up by about 10 times at $56 billion. Indeed, there’s potentially more upside for shareholders if the Grab-Gojek merger pushes through. While Didi could be overvalued, we can generally view the outcome as positive.

But a Grab-Gojek merger isn’t going to be easy. While Didi and Kuaidi had a common enemy in China – Uber – to catalyze the deal, the Southeast Asian startups are primarily competing against each other. In my conversations with Grab and Gojek loyalists, it seems like no one really favors a merger, citing concerns about cultural differences. Most people also genuinely think that each company is better off going at it alone: Competition helps advance innovation, making both businesses stronger and keeping consumers happy.

But perhaps the biggest stumbling blocks to a merger aren’t from internal issues. Instead, the likely obstacle is competition laws, a well-respected investor told me. There’s no way that competition watchdogs will allow the deal to go through, especially not after Grab bought Uber’s Southeast Asia business in 2018.

Is it possible, though, that all this might change, given that Gojek’s co-founder and ex-CEO Nadiem Makarim is now a government minister and presumably has much closer ties with the Indonesian authorities? Could he help influence the relaxation of anti-competition rules in the country?

Given that Gojek’s overseas operations have achieved just a fraction of its success back at home, some observers contend that it would be wiser for the company to redirect resources back to Indonesia. And if that happens, the possibility of a merger could inch closer to reality. 🤷

Grab seems to be in the driver’s seat for now, but in the ever-changing world of tech, we’ll never know if that will always be the case. So you can’t write off Gojek, especially since it’s set to close a massive series F round, or the possibility of a merger just yet.

See you next week!

You can find last week’s commentary via this link: “Why more startups should aim to become phoenixes 🔥”. You can also read all my commentaries here.

P.S. I know, I know. If a merger does happen, consumers would suffer, right? Honestly, the days of promo codes galore are long over, and it isn’t happening in the current climate – at least not in Singapore. This might be an unpopular opinion, but if we truly love the convenience offered by Gojek and Grab and assuming that prices aren’t exorbitant, shouldn’t we support their path to profitability so their services and impact on society last?