Gojek-Tokopedia merger: other startups eye fresh valuations

Jakarta

AS Indonesia's investment community waits anxiously for new developments on the possible merger between tech giants Gojek and Tokopedia, many startups are also looking at what this could mean for their own valuations in the years to come.

Gojek, Indonesia's largest ride-hailing and transportation company and Tokopedia, the country's largest e-commerce platform, were reported to have entered into talks of a possible merger early this year.

A deal between the two unicorns would value the combined entity at more than US$18 billion and the joint venture would have a wide range of business offerings from transportation to payment, to online shopping and shipping.

According to some media reports, Gojek and Tokopedia are believed to be looking at different options including setting up a new holding company structure that will house them as separate entitites and let them retain their individual brands.

The merger talk has set the country's investment and tech community abuzz given the major implications for the overall sector.

If the deal does go through, it would set new valuation benchmarks for other fast growing start-ups as well as create greater awareness of the underlying potential in the country's digital economy.

"There is a lot of investor interest in tech and it is not limited to only a few sectors," said Patrick Walujo, co-founder and co-managing partner of Northstar Group. "This is a very active sector and we will see more large deals coming through."

Mr Walujo is a close friend of Gojek founder Nadiem Makarim and was one of the early investors in the ride-hailing start-up. He currently sits on the board of Gojek.

Hadi Cahyadi, founder and managing partner of Helios Capital, said the merger will depend heavily on price and synergy value.

"If the synergy value is higher than the purchase price, the deal will go through," he said.

Post-merger, he feels that investors will focus on the acquisition value of the new entity to gauge whether the merger was successful. But looking beyond the merger, the deal will set new price benchmarks for future acquisitions.

"Every transaction becomes a new benchmark for the investor community," Mr Cahyadi said.

"If a seller such as Gojek can sell at 100 times Ebitda, other tech companies with similar prospects will also benefit. This deal will set a new floor multiple for Indonesia's start-up sector."

One potential beneficiary is healthtech start-up Halodoc, which has seen impressive growth over the past 12 months due to the Covid-19 pandemic.

The start-up reported a hefty 174 per cent increase in vitamin and supplement purchases on its platform as Indonesian consumers rushed to buy healthcare products.

"For Halodoc, the increase in the multiple from the Gojek-Tokopedia merger will be fantastic for its own fund raising and possible acquisition," he said.

This point is relevant given that Chinese tech giants such as Alibaba and Tencent have been pumping large amounts of investments into Indonesia's tech sector.

Tencent is said to have invested heavily in Gojek while Alibaba has investments in e-commerce platforms Tokopedia and Bukalapak.

"Tencent and Alibaba do not see Gojek and Tokopedia or Grab when they look at investment opportunities," said economist Wijayanto Samirin who served as economic advisor to the vice-president of Indonesia from 2014 to 2019.

"They see the Indonesian market and are strategising on how to dominate given its large size and potential."

He added that some consolidation will benefit the tech sector as it will drive scale and greater innovation.

Given the complimentary nature of Gojek and Tokopedia, the Indonesian public can look forward to new services and products if the two merge.

Looking at the bigger picture, there could well be a much larger prize at stake, with Indonesia poised to become the new battleground for Chinese and international tech giants looking to extend their footprint in South-east Asia's largest economy.

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