From $3.4 billion to $800 million: Unacademy may be looking for a buyer as valuation takes a major hit – Times of India

Unacademy is reportedly in talks to be acquired. Allen Career Institute, an offline test preparation centre, is likely to offer a deal that could value the edtech firm at $800 million. This represents a significant drop from its peak valuation of $3.4 billion. According to a report by the Economic Times, three unnamed sources in the know of this deal said that it has been under discussion for several months and is now awaiting final approval from Allen’s promoters, the Maheshwari family. If successful, this acquisition would mark a major consolidation in the edtech sector, which has been struggling with a post-Covid slowdown and the fallout from Byju’s bankruptcy and financial irregularities. Unacademy, which started as a YouTube channel ten years ago, has also shifted to an offline model after facing challenges in the online-only market.

What the report said about the rumoured deal

One person close to the talks said to ET: “While the negotiations have been on, with investment banks involved from both the sides, the key to the deal going through is to bring the Maheshwari brothers on board for merging Unacademy with Allen. While the negotiations have been on, with investment banks involved from both the sides, the key to the deal going through is to bring the Maheshwari brothers on board for merging Unacademy with Allen.”
“The valuation of both companies will be used to fix the share swap ratio and that process is yet not completed,” a second person said to ET. He also added that the potential cash payouts to the founders and early investors of Unacademy are yet to be finalised.
Meanwhile, a third person who was also familiar with the matter said to ET: “While Unacademy has controlled its losses, its revenue has been flat. As for Allen, the business, while being profitable, has seen a significant dip due to the stress in the Kota coaching ecosystem. The valuation being ascribed to Unacademy includes the cash balance of around $160 million that the edtech firm currently holds in the bank.”
He also highlighted that this has become a key point of contention between the two parties in determining Unacademy’s enterprise valuation, excluding its cash holdings.

What will happen to Unacademy if the deal goes through

If the acquisition goes through, Unacademy co-founders Gaurav Munjal, Roman Saini, and Sumit Jain are expected to depart from the company. Another co-founder, Hemesh Singh, who resigned from the chief technology officer role transitioned to an advisory role in June.
The merger discussions are reportedly being led by Munjal and Bodhi Tree, an investor in Allen Career Institute. Bodhi Tree, a joint venture between James Murdoch and Uday Shankar, invested $600 million in Allen in 2022.
Unacademy has raised a total of $880 million from notable investors like Temasek, General Atlantic, and Tiger Global. However, the potential payout structure for founders and early investors in the event of an acquisition remains a key point of negotiation.
“Allen’s interested in Unacademy to spruce up its digital presence and potentially go public as a merged entity. The Unacademy shareholders want to be a part of a profitable venture like Allen so they have been pushing for it to go through,” one of the sources added.