Edtech companies see record buyouts this year2 min read . Updated: 24 Aug 2020, 06:26 AM IST
- Year to date, there have been 13 buyouts and funding rounds worth $954 million in edtech startups, compared to nine buyouts and investments of $520 million in 2019
- Among edtech startups, Byju’s, Vedantu and Unacademy have been steadily buying out niche startups to diversify portfolios
Edtech and e-health startups are on an acquisition spree as stronger companies attempt to fill gaps in portfolios or try to gain scale amid a surge in demand for remote learning and treatment options.
Year to date, there have been 13 buyouts and funding rounds worth $954 million in edtech startups, compared to nine buyouts and investments of $520 million in 2019, according to data sourced from researcher Tracxn Technologies Pvt. Ltd. Healthtech saw four acquisitions and funding rounds totaling $300 million, in the year to date period, according to Tracxn data.
Mergers and acquisitions are expected to continue in edtech and e-health startups as investors expect the covid-19 crisis will create a permanent change in how people access healthcare and education.
Among edtech startups, Byju’s, Vedantu and Unacademy have been steadily buying out niche startups to diversify portfolios.
The investor community is convinced that the right alliances will help get them better valuations for their portfolio companies, said Amarjeet Singh, partner - tax, regulatory and internet business, KPMG in India.
“We will definitely see a bigger appetite for acquisition in this sector because of the sheer size of the addressable market. The only issue would be to find quality targets that are unique with sustainable revenue streams," Singh said.
In e-health, most recently, Reliance Industries Ltd acquired a 60% stake in online pharmacy Netmeds for ₹620 crore. Online medicine and healthcare products retailer Pharmeasy has proposed a merger with rival Medlife. If the merger goes through, Medlife is expected to get a 19.59% stake in Pharmeasy. The combined entity is likely to be valued at $1.15 billion.
This year, Byju’s acquired code training app WhiteHat Jr for $300 million, marking its fifth acquisition. It had last acquired Osmo, a maker of educational games, for $120 million in January 2019.
In a recent interview, Byju Raveendran, founder of Byju’s, said if a potential acquisition or merger fits into its strategy of building a product focused on the same age groups, brand vision, and demographics, then it will surely examine it.
“So, in the future, we will also look at companies that fit into our long-term vision of helping students get access to different learning formats of online learning," Raveendran said.
Similarly, Unacademy bought PrepLadder, a postgraduate medical entrance exam preparation platform for $50 million in July, as it looks to strengthen its presence in medical entrance examination categories.
In March, it acquired Kreatryx, an online preparation platform for the Graduate Aptitude Test in Engineering and the Engineering Services Exam.
“We are consistently working towards building the world’s largest educational platform. As we seek to deepen our footprint across multiple categories, we are always on the lookout for like-minded partners who share the same vision and have made a difference within specific test preparation categories," said Gaurav Munjal, co-founder and CEO of Unacademy.
While Unacademy raised $110 million at a valuation of more than $500 million earlier this year, Byju’s has raised $500 million this year at a valuation of $10.5 billion and is in talks to raise another $400 million from DST Global.
E-health startups have also seen more acquisitions. The Netmeds buyout is expected to not only strengthen RIL’s e-commerce play but also add to its healthcare portfolio.
The proposed PharmEasy-Medlife merger indicates early signs of consolidation in the e-pharmacy segment. In June, DocsApp, an online doctor consultation app, merged with healthcare platform MediBuddy.
Much like e-commerce marketplaces, dominated by the duopoly of Flipkart and Amazon, a spate of mergers and acquisitions in both e-health and edtech may see the rise of a few, strong companies.