Recently rumors started circulating online suggesting that two of Southeast Asia’s largest mobility players, Grab and Gojek, are allegedly discussing a merger. Pundits have been contemplating this scenario since October, when Nadiem Makarim, Gojek’s co-founder and former CEO, left the company to go into politics. Grab’s improved statistics also added fuel to the discussions, according to the Chinese outlet The Latest IPO, in June 2019, after the completion of a $1.46 billion financing round led by SoftBank, Grab’s valuation exceeded $14 billion with the app’s annual transaction volume increasing by more than 100%.
According to The Latest IPO, Grab’s annual transaction volume has increased by more than 100%. Many concluded that a merger could be a logical next step for the two giants waging a ruthless price war against one another. While Gojek has reportedly denied its involvement in such talks, a potential merger between the two does not sound like something completely out of the question. Moreover, it got us thinking, if there was any chance for some of the Chinese tech titans to do the same.
Didi + Meituan Dianping
While at first sight DiDi and Meituan seem intrinsically different, the two companies are in fact essentially working on solving a similar problem – streamlining our urban existence. Meituan deploys algorithms that allow it to efficiently assign takeaway orders to the most appropriate couriers, and DiDi uses a similar model to efficiently fulfill trip requests. In truth, both firms are thriving off of our location data constantly creating new scenarios that would allow them to capture our urban movements.
Meituan has previously tried to enter into ride-hailing with a lackluster addition to its super-app, while DiDi is cautiously trying its hand at food delivery outside China. A merger between DiDi and Meituan would birth a real location-based service behemoth leveraging both companies’ expertise in the domain and inevitably harmonizing their respective businesses. The ethics of this merger, are a whole other story, as the resulting monopoly would arguably have way too much power on its hands.
While merging Alibaba with JD may seem like a more obvious move, we’d argue that it’s not something that Alibaba would go for. This maneuver goes against Daniel Zhang’s philosophy summarized in his quote, “If we don’t kill our existing business, someone else will”. JD’s business is just too similar to that of Tmall and Taobao. Pinduoduo, on the other hand, emerged as an e-commerce disruptor with its fresh group buying business model, which could make a good weapon for Alibaba to kill its existing business.
In any case, be it JD or Pinduoduo, any potential deal would more likely be shaped as an acquisition rather than as a merger. None of China’s e-commerce players come even close to Alibaba with its $200-billion market cap.
Tencent with its $487 billion market cap is the other colossus of Chinese tech’s ruling duopoly, incomparable to ByteDance, valued at $78 billion, and Baidu at $42.8 billion. However, all three companies have their strong suits and are challenging each other in certain sectors. ByteDance is taking on Tencent in gaming and social media, while Baidu is an important player in AI where both Tencent and ByteDance have stakes. Additionally, Baidu and ByteDance have an ongoing rivalry in online search technology.
While in this case too, the so-called merger is likely to assume the form of an acquisition, the resulting union would either produce a global internet leader or a destructive monopoly. Either way, it’s unlikely we ever find out. Zhang Yiming and Robin Li aren’t the type to give up their companies without a big fight.
Long lost union
Ofo + Mobike
This is one merger that was destined to happen and could’ve benefited both companies and changed the fate of the bike-sharing industry. Yet as it often happens, personal ego, intrigue and the pressures of big capital have resulted in blurred vision and big strategic mistakes that reshuffled the whole industry and betrothed the bike-sharing mantle in China to Meituan.
Had ofo and Mobike merged, automatically ending the numbers war that devastated both companies, there would be a chance for the new entity to eventually reach profitability by raising prices and scaling down on new bike deployment. Sadly, Mobike was acquired and is being re-branded as Meituan Bike, while ofo remains virtually obsolete.