Editor's Note: 2015 has seen a flurry of mergers in the Internet industry. China's two largest ride-hailing apps joined forces earlier this year after years at each other's throats. Following this, there are different mergers taking place for different reasons. Will all mergers be win-win? And what impacts will each merger have on other players in the industry?

The start-up pages of the Didi Dache (left) and Kuaidi Dache ride-hailing apps. The makers of the two apps announced their merger in February 2015. Photo: CFP

Ride-hailing services

Valentine's Day has always been a day for proposals. China's two largest ride-hailing app makers, Didi Dache and Kuaidi Dache, apparently agree. 

After a year of cut-throat competition, the two companies announced their merger on February 14, 2015.

Hangzhou-based Kuaidi, backed by e-commerce giant Alibaba Group Holding, and Beijing-based Didi, supported by Internet titan Tencent Holdings, each burned through a lot of cash in 2014 on passenger discounts and driver subsidies in a frantic battle for the market share.

According to estimates by tech.163.com, the two companies spent more than 2 billion yuan ($308.6 million) on subsidies and discounts in the first half of 2014.

Even with the merger, the pair agreed to maintain their own brands and retain their own CEOs to co-chair the new company, called Didi Kuaidi.

Didi Kuaidi has since cut back spending on subsidies and discounts.

Instead, the new company has put more efforts into exploring other parts of the transportation business, fast-tracking the development of its car-hailing services.

In October, the company obtained the first Internet car-hailing license in China from the Shanghai Municipal People's Government.

However, after the merger, the Didi Dache app, which was renamed Didi Chuxing in September, has developed faster than that of its partner Kuaidi.

Didi Chuxing's market penetration rate was 11.4 percent in June, up from 10.47 percent in January before the merger. However, Kuaidi's penetration rate fell to 2.3 percent in June from 3.9 percent in January.

"It is very likely that Kuaidi Dache will disappear in the end, and be completely taken over by Didi Chuxing," said Liu Dingding, an industry analyst with Beijing-based market consultancy Sootoo.

The current co-CEO arrangement is only a transitional governance structure, Liu said.

"However, it is unlikely that their merger will squeeze other players out of China's ride-hailing market, which is big enough for several big shots to coexist," he told the Global Times on Sunday.

In the third quarter of 2015, Didi Kuaidi dominated 80.2 percent of the market share in China's ride-hailing industry. Its US-based rival Uber Technologies Inc lagged far behind with 9.1 percent of the market share, according to Sootoo.

Group buying

On October 8, China's two largest group-buying services, Dianping Holdings and meituan.com, announced that they had joined forces to become the leading platform in the country's online-to-offline (O2O) sector.

Like Didi Kuaidi, the new combination of Meituan and Dianping will also adopt a co-CEO governance structure, with Meituan CEO Wang Xing and Dianping CEO Zhang Tao co-chairing.

Their management structures, brands and business operations will remain separate.

Analysts said the purpose of the merger was to raise capitals to fend off the competition from other Internet companies, such as Baidu Nuomi, Internet giant Baidu Inc's O2O service.

Meituan CEO Wang Xing said on Thursday during the second World Internet Conference in Wuzhen, East China's Zhejiang Province, that the merged company's fundraising efforts had gone "very well," web portal sohu.com reported on Thursday.

The company, which was said to be worth as much as $20 billion, could raise $2 billion to $3 billion in its first round of fundraising, techweb.com.cn reported on October 19.

Liu, the analyst, told the Global Times that the merged company will pose a threat to Baidu Nuomi, which held 20.1 percent of China's 55.4 billion yuan group-buying market in the third quarter.

A report issued by Beijing-based consultancy Analysys International in October showed that Meituan led the industry with a market share of 47.9 percent in the third quarter of 2015, followed by Dianping with 30 percent.

Online travel services

Mergers and acquisitions have also been common in China's online travel services sector.

The country's leading travel booking website operator Ctrip.com International Ltd bought a $200 million stake in its rival Tongcheng Network Technology Share Co in April 2014.

It then purchased nearly 40 percent of another rival eLong Inc in May 2015.

While analysts believe the deal with eLong aims to counter the threat posed by Ctrip's biggest rival in the online travel industry, Qunar Cayman Islands, backed by Baidu Inc.

Ctrip made a big splash in this October when it announced its acquisition of a controlling stake in Qunar.

Under a share swap deal signed between Baidu and Ctrip on October 26, Ctrip will own about 45 percent of stakes in Qunar.

In return, Baidu will own about 25 percent in Ctrip, making Baidu its biggest single shareholder.

The deal comes about five months after Qunar rejected a buyout offer from Ctrip, according to media reports.

Analysts said that Baidu is the biggest winner in the deal, which makes it more competitive against e-commerce giant Alibaba and Internet powerhouse Tencent Holdings.

"The partnership will pose a great threat to other online transportation and accommodation booking service providers," Zhu Zhengyu, an analyst at Analysys International, told the Global Times in an earlier interview.

Zhu noted that websites, such as alitrip.com, which is part of Alibaba, will also be threatened.

The combination of Qunar and Ctrip will be worth about $15.6 billion, according to a research note released by Analysys International in October, 2015.

Matchmaking sites

One of the latest mergers in the Internet sector took place between two major domestic matchmaking websites.

On December 7, NASDAQ-listed Jiayuan.com International Ltd announced that it would be acquired by its rival Baihe Network Co at the price of $5.04 per ordinary share and $7.56 per American Depositary Share. Under the merger plan, the new company would retain each partner's brand.

The merger will likely ease the fierce competition between the two companies.

Baihe CEO Tian Fanjiang said on December 7 that the competition has "consumed a lot of mental energy and resources at both companies, and hindered their developments."

This is a common purpose of almost all mergers in the Internet sector, and Baihe appears to benefit a lot from the deal in terms of its user base.

Data from Analysys International showed that Jiayuan has outperformed Baihe in terms of both user activity and market share. Jiayuan had about 11 million active users in the second quarter of 2015. Baihe had about 2.4 million.

As for the market share, Jiayuan had 26.7 percent of the domestic online matchmaking market in the second quarter, while Baihe had 12.2 percent.

"The merger is a quick way for Jiayuan to go private and then get listed on the Chinese mainland," Liu said.

In November of 2015, Baihe announced it floated on China's New Third Board after pulling out of the US markets in 2014.

Jiayuan's management team began planning its privatization earlier this year when the domestic stock markets were soaring.

In March, Jiayuan received a buyout proposal from its board of directors at the price of $3.58 per ordinary share.

The deal is expected to be completed in the first quarter of 2016, according to media reports.
Newspaper headline: The annum of alliances