Will Byju's be the next Master of Ed Tech after plans of acquiring Gradeup & Great Learning?

An in-depth study of the world’s most successful companies reveals that acquisitions are an important part to achieve strategic goals. Despite the plethora of challenges that come hand in hand with acquisition, they are conspicuously faster, cheaper, and much less volatile than expanding organically. Some acquirers have discovered the way out to do it right. Many have not. Byju’s is definitely the one who has aced the game of acquisition.

Edtech major Byju’s has been on an inexorable acquisition spree and looks like it has no plan to stop or gradual down. After Aakash Institute, WhiteHat Jr and Scholr, now it is in conversation with acquiring the platform Great Learning and the test prep firm Gradeup. It is assumed that talks with Toppr also continue simultaneously.

According to sources, negotiations with both companies have reached the post-term sheet stage. To acquire Great Learning, which is almost a decade-old bootstrapped startup, Byju’s is anticipated to spend over $330-350 million. It offers multiple programs in the field of Analytics, AI, Machine Learning, Data Science, Cybersecurity, Cloud Computing, and Digital Business.

In the case of Gradeup, which is an exam preparation destination based in Noida, Byju’s is expected to spend $40-50 million to acquire it.

Ed-Tech companies acquired by Byjus

1. WhiteHat Jr: It is India's #1 Live online one on one platform for coding and math. From a tender age of six, kids on this platform can indulge into learning logic, sequence, structure and algorithmic thinking to generate creative outcomes like animations and apps.
2. Aakash Educational Services Limited (AESL): It is a 33-year-old Indian educational institution that provides comprehensive test preparatory services to students who want to pursue careers in medicine and engineering. AESL prepares them for medical and engineering entrance exams, school/board exams, KVPY, NTSE, Olympiads and other Foundation level exams.
3. Scholr: It is one of the fastest-growing automated-answering platforms, which is AI enabled. It provides free video solutions to classes 6 to 10 Math questions and NCERT book questions instantly.
4. Toppr: It is an after-school learning platform on a mission to make learning personalised. Having more than 1.5 million learning pieces, it provides a comprehensive coverage of the K12 syllabus. Abled with artificial intelligence, machine learning, and big data, they strive to ensure that every student has a unique and personalised learning experience. Byju’s is in the advanced stage of its negotiation talks with Toppr.
5. Gradeup: It is India's largest competitive exam preparation destination. Their goal is to provide the most effective exam preparation experience to aspirants all across the country.
6. Great Learning: Great Learning is one of India's leading Ed-Tech companies that offers Post Graduate and Certificate programs in fields of Data Science, Business Analytics, AL & MI etc. The institute not only provides classroom courses but it also imparts education through online mode. These comprehensive courses are offered in collaboration with numerous other institutes, organisations and campuses all over India.

Byju’s Acquisition Game

Acquisitions, if done right, assist meet strategic goals which eventually leads to greater potential for growth and profitability. They increase the company’s revenue substantially and accelerate organic revenue growth rate, and make a significantly positive contribution to the net income and cash flow.

Plenty of evidence indicates that one of the best approaches for acquisition is to pursue what are called adjacencies—these are the logical extensions of a company’s current business mix, which can be taken on incrementally. 

For instance, Byju’s caters to students from kindergarten to the 12th grade and is India's largest ed-tech company. While proceeding with acquisition, Byjus, diligently employed the approach of acquisition, and acquired companies which corresponded with its current business mix, which is of catering to the student community and contributing to the ed tech sector. If we look at the ed tech platforms Byju’s have acquired in the past twelve months or plans to acquire, we would notice they are all logical extensions of what it already caters for. 

Adjacencies take advantage of the tacit strong points of an organization—customer insights, management know-how, and cultural orientation—that are often ignored by strategists. With an adjacent acquisition, these organizational attributes meanders toward making the integration work and allows the acquirer to capitalize on what it has bought. For all these reasons, adjacent acquisitions make for a compelling growth strategy.

For a  successful acquisition it is important to make multiple smaller acquisitions rather than making one or two big bets and hoping for the best. The perception that smaller is better is not a hypothesis but is backed by research. Numerous studies, like one by Bain & Company have shown that the economic returns were considerable from acquisitions that represented five percent or less of the acquirer’s market capitalization. 

Apart from acquiring Aakash Educational Services Ltd in a cash and stock deal estimated at $950 million, which among the largest acquisitions by an indian startup, Byju’s has since then acquired multiple smaller ed tech companies, like Gradeup and Great Learning, on which it is expected to spend $40-50 million and  $330-350 million respectively.

Byju’s has employed a bolt-on acquisition type which fits neatly into the business or market they are already in. In the other, the platform type the company gets into a new business space or activity which displays a higher degree of difficulty and entails more risk. Byju’s has expanded itself in the niche it was already in, and plans to take over the ed tech sector of the Indian market.

Byju’s emerging as India’s most valuable startup

India’s third largest unicorn, Byju’s is all ready to boost approximately $150 million from multinational Swiss bank, UBS Group AG, which will make it India’s most valuable start-up by scaling up its valuation to about $16.5 billion.

A report by Bloomberg stated that an entity belonging to UBS Asset Management will invest additional money into this ten-year-old ed tech online learning start-up.

This additional investment will take UBS’s total investment in Byju’s to around $300 million, added sources, who refused to be identified. Apart from this investment, there is a possibility of another backer pumping money into Byju’s which will take its fresh funding to $400 million.

Earlier this month, the company’s latest round of funding was an amount of $1 billion from Facebook Inc. co-founder Eduardo Saverin’s B Capital Group, and Baron Funds and XN as well.

This UBS investment will shoot up Byju’s valuation and strike out Paytm, last valued at $16 billion from the top slot as the country’s most valuable start-up. In an interview Byju’s founder and CEO, Byju Raveendran had told the Ministry of External Affairs’ Indbiz, a website of the Economic Diplomacy division, that he had no specific strategy in place to approach the investors.

As a brand, they were determined on solving core issues like the “access to quality teachers across geographies using technology”, he said. From the time they had early investors Mark Zuckerberg and Dr Priscilla Chan backing them, he said that what attracts all their investors was the fact that they had a solid business model and addressed “key issues in the education sector”.

Since India is currently the second largest marketplace for e-learning after the United States, investors are overwhelmed with the ed-tech sector and they recognise the requirement and demand for such services and also because it is a “very scalable and profitable business”, he added.

Byju’s, which is officially called Think & Learn, has sorted a remarkable list of investors, which includes private equity giants Silver Lake Management, Owl Ventures and T. Rowe Price, Naspers and Tiger Global Management.

However, this news about the fresh investments into Byju’s was not confirmed either by UBS Management nor by Byju’s, stated Bloomberg.

Byju’s since the past year has acquired or is in the process of acquiring almost six Ed Tech companies. It has bought the companies which vibe with its organic business mix yet they add additional extensions of the same. From kindergarten to high school to college and postgraduates, Byju’s has ensured that it is on the right path to capture the entire educational segment of the market and cater to the needs of all kinds of services, that of from Medical, engineering, AI, coding, to almost all subjects from UKG to 12th and beyond.

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