Gojek and Tokopedia Merger

Asia's tech space is buzzing with excitement over the potential merger between two of Indonesia's
largest tech startups, Gojek and Tokopedia. With combined reported values of around $18 billion,
super app provider Gojek is valued at $10.5 billion, while Tokopedia, one of Indonesia's largest e-
commerce platforms, is valued at $7.5 billion.

Coming at the heels of the protracted speculation of a merger between Gojek and its Singapore
rival Grab, with the two sides unable to agree on the terms, Gojek's union with Tokopedia seems
like a blissful pairing that has all the hallmarks of a fairy-tale marriage.

To be sure, the market has been throbbing with talk of why the merger makes sense, at least from
the synergy viewpoint at the company level. But at a broader level, there are concerns over whether
this merger is in the interest of other stakeholders beyond both companies. Will the merger lessen
competition to the detriment of consumers? And will a combined Gojek-Tokopedia consolidate
their entire tech ecosystems to benefit the overall economy?

Tech startups love scaling up. In doing so, they build size, usually along with a key product
offering. This was the way with Gojek's proposed merger with Grab, which would have been a
non-starter due to resistance from regulators in Singapore and Indonesia. However, the
amalgamation with Tokopedia has reportedly been given a green light by Indonesian authorities.

The target valuation of $35 billion to $40 billion would catapult the merged Gojek-Tokopedia
almost to the very top of the Indonesia Stock Exchange if it is listed there. A dual listing, possibly
on an American stock exchange, would lend further credence to its stock valuation, including its
liquidity and turnover.

At first glance, the Gojek-Tokopedia union looks like a compelling fit. The on-demand multi-
services of Gojek, particularly ride-hailing and digital payment technologies, will adroitly
complement those of Tokopedia, especially e-commerce and the logistics offerings.

The merged entity will pit itself against Singapore's formidable Sea, a global consumer tech group
being touted as Southeast Asia's most valuable company. Deeply ensconced in the digital arena,
Sea's assets include the popular Shopee e-commerce platform, as well as the gaming-based Garena
and the payment and financial services platform SeaMoney.

The Gojek-Tokopedia entity will position a suite of products to go head-on with Sea, although the
synergies are arguably even tighter. There are clear intersections in the offerings of the resultant
merger with that of Sea.

Thus precisely because of the merger, we will have a more competitive landscape among the new-
breed of high-growth tech players. The merger will be a game-changer for Southeast Asia, and the
entire Asia region. It will remap the competitive boundaries and lead to a consolidation in markets
where fragmented players are aggregated.

Government Rules

Perhaps the single greatest impediment to a G&T merger is the Indonesian central bank‘s (Bank
Indonesia) “single presence policy” that prohibits a party from owning a controlling interest in
more than one licensed e-money issuer such as Ovo and Go-Pay. As we know that Tokopedia also
owns OVO, e-money platform from Go-Jek main competitor, Grab.

This would mean that G&T would not be able to merge their respective digital payment units,
without a specific waiver from Bank Indonesia (BI). This is not to say that such a waiver would
be beyond the reach of G&T. Gojek and Tokopedia are funded by influential backers, who have
access to the highest levels of government in Indonesia - including Gojek founder Nadiem
Makarim, who is the youngest Minister of Education in Indonesia’s history.

It is therefore not inconceivable that BI might be persuaded to allow a merger between Ovo and
Go-Pay, or at least permit a merged G&T to continue holding controlling interests in both payment
companies, especially in the interest of creating a homegrown technology major.

What happens, however, if BI does not approve the merger? Some say that Tokopedia will sell its
stake in Ovo. Should this happen, it is likely that Grab, whose financial unit recently raised US$300
million, and who will likely have a right of first refusal on the proposed sale, will make a bid for
Tokopedia’s stake in the payments company.

Such a move will, at least in theory, allow Grab to further entrench itself in the lucrative payments
space in Indonesia. This amid rumours of a possible merger between Ovo and Ant Group-backed
e-wallet Dana, and barely three months after Grab invested in Indonesian state-owned e-wallet
operator LinkAja. Such a move will also narrow the gap between Grab’s payments business and
Gojek’s.

Assignments

1. Reviews the case

2. Identify what is the problem from the perspective of organization theory

3. Answer the questions based on theory and support data (journals, books, company profile, and

etc). Support your argument with the theories in chapter 5 of Daft (2018), Organization

Theory and Design.

 Questions

1. Based on the casae explained above, identify the three mechanism of Institutional Similarity
between Go-Jek and Tokopedia and why do you think this merge could be working!

2. In the population ecology perspective, generalist and specialist strategies distinguish

organizational forms in the struggle for survival. Which one do you think will be most suitable for
the new Gojek and Tokopedia merged organization? Explain your idea!

3. The population-ecology perspective argues that it is healthy for society to have new
organizations emerging and old organizations dying as the environment changes. After Gojek and
Tokopedia merge, which parties do you think will be benefited the most and which other parties
will be loss? Explain your idea!

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