ByteDance is compelled to sell TikTok to a United States-based company within a 180-day period, as mandated by a bill passed by the US House of Representatives recently. Failure to comply may result in TikTok being banned from its 170 million users in the US.
According to experts, this could potentially be one of the most challenging and complicated transactions in history due to financial, technical, and geopolitical challenges, which may render the sale impractical and increase the likelihood of losses.
The legislation, expected to be signed by President Biden, was introduced in the House but is predicted to face hurdles in the Senate and may encounter constitutional challenges in court.
Financial experts, however, suggest that the legislative process targeting the video-sharing app, owned by the China-based internet giant ByteDance, might be smoother compared to other transactions.
The sale would involve divesting TikTok, estimated to be worth $150 billion (Rp 2,360 trillion), from its parent company, ByteDance. However, the potential sale of TikTok also faces legal challenges and resistance from China, which has vowed to block any deal with the US.
Despite arguments from supporters of the bill that its purpose is not to block TikTok, there is a significant possibility that TikTok may fail to meet the divestiture deadline of six months.
"As we can say in the business, the number of hurdles in this transaction is extremely high," said Lee Edwards, former merger and acquisitions partner at the law firm Shearman & Sterling, as quoted from the Washington Post.
"To complete a deal of this size and complexity in just half a year, including navigating any regulatory reviews that may be required in countries around the world, would be extremely quick and aggressive," he added.
Every potential buyer of the company, he said, would need to dedicate significant management resources and strategic planning with a high risk of failure.
TikTok's Estimated Value at Rp 1,574 Trillion
According to a financial analyst's estimate, TikTok might be sold for a price exceeding $100 billion (Rp 1,574 trillion). This figure, including low estimates, is significantly below the $150 billion valuation that TikTok received last year, with $16 billion in revenue generated in the US alone. The Financial Times reported that the revenue figure should have valued the company at $150 billion.
This price tag would only be met by a few buyers and would set a new milestone for acquisitions of tech giants. However, purchases by its tech rivals may face strict antitrust scrutiny in the US and worldwide, which could slow down or even halt the process.
"The list of bidders here is very short," said David Locala, former global technology mergers and acquisitions head at Citi, a multinational investment bank in America.
"The US regulators may need to take action, whether they want TikTok ownership in the US, or whether they want one or more large tech companies to become even bigger," he explained further.
With a purchase price of $100 billion, TikTok would become one of the largest merger and acquisition deals in history in terms of complexity and time constraints.
For example, the AOL-Time Warner merger in 2000, valued at $182 billion (Rp 2,864 trillion), took about a year to complete.
Additionally, Elon Musk's $44 billion (Rp 692 trillion) purchase of Twitter in 2022 took approximately six months to complete - and the sale was fully supported by Twitter's board of directors.
However, given TikTok's potential, many are prepared to acquire the popular app.
Former Treasury Secretary Steven Mnuchin stated to CNBC International last week that he was assembling a group of investors willing to buy TikTok.
Meanwhile, Bobby Kotick, former head of the video game giant Activision Blizzard, and Kevin O'Leary, a Canadian investor from the TV show "Shark Tank," have both expressed interest in the TikTok deal. However, they may not have the funds to conduct a serious takeover, and pooling their funds as part of an investment consortium would pose new challenges.
"With a consortium, you never know if someone is truly involved until the deal is done," said Locala. "The more parties you introduce, the harder it is to make progress," he explained.