How the Grab-GoTo merger could impact merchants across Southeast Asia

Grab has been in the news after reports surfaced of the company being in advanced talks to merge with Indonesian competitor GoTo. According to Reuters, the new round of merger talks, which were last held in 2024, resumed last December as investors were eager to reach an agreement this year. The companies reportedly seek to curb years of losses in Southeast Asia's (SEA) competitive market. However, anonymous sources who spoke to Reuters reportedly said the deal may not be reached as previous negotiations had fallen through. 

Following the rumours, GoTo Group clarified that speculation about a potential merger with Grab is untrue. "The company affirms that no agreement has been made with any party regarding a merger transaction, as reported in the media," said GoTo's corporate secretary, R A Koesoemohadiani, in a disclosure document to the Indonesia Stock Exchange (IDX). "There have been no discussions by the company regarding any agreement with Grab," she added.

This is not the first time such rumours have surfaced. Similar speculation about a potential Grab-GoTo merger emerged in 2024, but was also denied by GoTo's management, and no agreement materialised. 

In the meantime, Grab has also made other moves to expand its business in recent times. In July last year, Grab acquired popular Singapore restaurant reservation app Chope for an undisclosed sum.

During the announcement, a Grab spokesperson when MARKETING-INTERACTIVE said, “The vast majority of the merchants on our platform are small, medium-sized businesses who don’t have the same resources or know-how that big F&B brands have. Our focus is to help level the playing field for them through tools that empower them to grow and manage their businesses more efficiently." 

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Back in 2022, Grab relaunched HungryGoWhere and its accompanying social media channels a year after the food site shut down in 2021.The revamped HungryGoWhere brand aimed to address the growing interest of diners to reconnect with the local food scene in much deeper ways. 

Mergers and acquisitions (M&A) in SEA have been a dynamic and integral part of the region's economic landscape. In recent years, the M&A market has shown remarkable growth, with the transaction value projected to reach US$50.75 billion by 2025, according to Statista. This surge in M&A activity is fueled by strategic objectives such as market expansion, diversification, and operational efficiencies.

As companies navigate the competitive landscape, these transactions seemingly offer opportunities to enhance their portfolios and optimise operations. With Grab's apparent unstoppable run of acquisitions, the question remains, how will these prominent moves, and the potential new merger of Grab and GoTo affect the market? 

The sizeable impact

According to David Lim, co-founder and fractional chief marketing officer of Avante Strategies, government authorities are already on their toes with regards to Grab and GoTo's merger. 

"Both Grab and GoTo have serviced the Southeast Asia population for substantial number of years, creating a high level of convenience that fits right in the lives of millions. Should this merger materialises, there will be deep socio-economic impacts," said Lim. 

Lim added that there will be a considerable amount of synergy within the Grab ecosystem for Indonesia, as well as the scale of the market to tap into the full potential of technology such as Grab Maps and existing fulfilment platforms.

He said, "GoTo's capabilities in the eCommerce space, having ran the biggest eCommerce platform in Indonesia, Tokopedia, for a long time, will probably ignite Grab's aspiration to provide a brand-new space for its users."

In tandem, Nishant Kaushal, founder and chief executive officer of ADNA Research said consumer competition watchdogs should be concerned about the likely market dominance and the potential harm to the two companies’ customers.

"A merger between Grab and GoTo would significantly reduce competition within the ride-hailing and food delivery sectors in Southeast Asia, particularly in Indonesia, the region's largest market. This consolidation could lead to narrower consumer choices, potentially resulting in higher prices and stifled innovation," he said.

However, Kaushal noted a win-win situation for both companies, explaining that the merger would solidify Grab's position as the dominant player, granting them near-monopoly status in SEA, significantly shifting the balance of power in their favour.

"With their historical challenges on profitability, this acquisition is another chapter in a series of such moves against competitors, uplifting the potential for significant cost savings for them through operational consolidation and reduced competition," he said. Kaushal added that GoTo will gain more financial stability, potentially improving its long-term viability, while leveraging Grab's advanced technology and logistics infrastructure.

Goal and potential challenges

Grab's aim to build a superapp which lives and breathes in SEA also did not go unnoticed by industry players. According to Lim, these acquisitions prove that Grab is moving further in to the superapp ecosystem slowly and steadily.

"That said, it's no wonder that a consolidation of the two giants occur in the coming years, if not in 2025," he said. However, Lim added that the change of management across multiple elements internally and externally will be an uphill climb. "Integration of technology platforms, increasing regulatory approval requirements, and clashes in corporate culture are some to be mentioned," he said. 

Echoing similar sentiments, Kaushal said the news of the merger further reinforces Grab's superapp ambitions by acquiring GoTo's offerings such as ride-hailing, food delivery, groceries, logistics, payments, financial services, e-commerce and technology solutions for merchants.

"With such a wide reach into various facets of their customers’ lives, Grab will further strengthen its access to valuable first party data and gain deeper insights into consumer behaviour, which can be used to improve and widen services and personalise offerings to extract more value per customer," he said. 

In spite of this, Kaushal explained that Grab may potentially face the challenge of integrating multiple brands and businesses as it requires significant resources and careful management. "The key would be to see how they could preserve and leverage GoTo’s unique and well-established brand identity while integrating them into the larger Grab ecosystem," he added. 

Getting airtime

Speaking on branding woes merchant partners might face, Kevin Kan, chief experience officer at Break Out Consulting Asia said one of the challenges for target companies who are taken over is whether they will get to keep their branding post-acquisition, and the ability to nab users' attention. 

"With so many competing merchants and internal brands, how do we get 'airtime' and the potential premium a merchant would have to pay for promotions or pop ups could become quite costly. Grab would then have to handle merchant dissatisfaction," he said. 

Nonetheless, the ability to keep a customer within the eco-system via a superapp allows Grab to increase marketing revenue. Kan added that with the move, Grab can charge premium merchant fees as it can provide merchant partners with the opportunity to not only provide a service but to also promote them via last minute add on sales to complimentary purchases.

From a marketer's perspective, Kan said it would be a challenge trying to promote all merchants and deals on the superapp, noting that it would be a battle to try and get real estate on a small mobile screen.

What else could this mean for marketers? 

For marketers, Lim noted that having a more streamlined branding and marketing budget would benefit the company's chief managing officer (CMO) and chief financial officer (CFO). 

"Return on investment (ROI) will most likely enjoy an improvement in the short term due to the consolidation of users in Indonesia. Other suppliers in the eco-system such as software as a service (SaaS) vendors should start the conversation with senior marketers of both Grab and GoTo to understand their upcoming challenges. This provides ample preparation time to ensure a smooth transition," he said.

Kaushal said that there will be multiple benefits for marketers to enjoy, including access to a larger and more diverse customer base through a combined platform, access to more comprehensive data on their customers that goes beyond just the ride hailing and food delivery parts of their lives, and further optimisation of marketing spends by reduced marketing costs through economies of scale and streamlined operations.

However, Kaushal also warned of the pitfalls that could come with the merger, including brand confusion. 

"Customers value choice. When their options are suddenly reduced, they actively seek alternatives. This dynamic can fuel the growth of smaller competitors, who may eventually be acquired themselves, and the cycle continues," he said. 

Kaushal added, "To break this cycle, companies must focus on addressing customers' core unmet needs so effectively that they no longer feel the need to explore alternatives."

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