Tech startups’ new playbook: Buy scale instead of burning cash to build it
UpGrad Education is pursuing the acquisition of Unacademy, while CarTrade Tech is close to acquiring CarDekho, highlighting a trend in India's digital economy towards consolidation. Tech firms increasingly favour M&As for growth, improving margins and market share ahead of potential IPOs.
India’s new-age tech platforms are increasingly taking the merger-and-acquisition (M&A) route to achieve better margins, stronger cross-sell potential, broader product offerings, and increased market share, rather than spending years creating demand and burning cash to sustain it.
In the latest instance, Upskilling company UpGrad Education Pvt. Ltd is exploring a deal to acquire test-prep platform Unacademy (Sorting Hat Technologies Pvt. Ltd), underscoring the growing consolidation across the country's digital economy.
“(Though) not every deal is about grabbing market share, that’s definitely the flavour of the season in the digital world," said Sandeep Gogia, managing director and sector lead-tech and digital, investment bank Equirus Capital.
Tech businesses are relatively asset-light and cash-rich, which naturally makes acquisitions a smoother route to scale compared to more capital-heavy industries, he said.
Earlier, tech firms used M&As to break into new markets or geographies, but that strategy has evolved. Now the focus is squarely on expanding share, accelerating scale, enhancing tech, speeding up go-to-market and building a stronger financial profile ahead of potential initial public offerings (IPOs), he explained.
For example, logistics services provider Delhivery’s acquisition of SpotOn Logistics, auto-tech firm CarTrade’s purchase of Shriram Automall, food-delivery giant Zomato’s takeover of Uber Eats India, and online travel portal Ixigo’s buys of Abhibus and Confirmtkt helped them expand market share, build scale, and enter adjacent or complementary segments, ultimately presenting a more consolidated and synergistic business ahead of listing, Gogia explained.
The tech sector has logged 95 domestic deals so far in 2025, including 26 inbound transactions, meaning global players snapping up Indian firms, and 44 outbound deals, where Indian firms went shopping overseas, according to private company data platform Venture Intelligence.
The growth expressway
As a category matures and incremental growth slows, buying distribution, capabilities, and users often becomes structurally more efficient than building them in-house, said Aakash Agrawal, head-digital and new age business, stock broker Anand Rathi Advisors.
While traditional businesses grow by expanding geography or capacity, internet companies scale by acquiring ecosystems, he said, adding that M&As become the logical lever to accelerate reach, boost monetization and expand moats.
Slowing user growth is forcing consolidation in mature segments like broking, lending, and auto marketplaces, while competitive intensity and speed-to-market are pushing strategic acquisitions in emerging segments like AI-led software as a service (SaaS) or wealth-tech avoid missing out, Agrawal explained.
The full-throttle expansion
The first signs of this shift emerged in late 2022, but the pace accelerated sharply through 2024-25, according to industry insiders. What were once opportunistic buys have now become deliberate, strategic moves built directly into companies’ growth plans.
It boils down to unit economics and timing, explained Agrawal.
As he put it, rising cost of acquiring customers (CAC), weaker performance marketing (a byproduct of large existing user bases), and slowing digital penetration have made inorganic growth more appealing than building from scratch.
At the same time, post-2021 valuation corrections have made assets more affordable. In many cases, buying an existing user base with monetization potential is now cheaper and far faster than creating one, he added.
Sourav Mallik, managing director and deputy chief executive at Kotak Mahindra Capital Co., also said digital and platform businesses are now reaching an inflexion point where they’re becoming more profitable and receiving better valuations in the market. That naturally fuels more M&As.
As more digital firms are listed and their market value rises, acquisitions become a logical way to keep scaling, he added. “If India is going to have 15-20 $5 billion+ valuation companies, it is only natural for them to undertake a few $500 million-$2 billion M&As every year."
In India, most user-focused categories still face a trade-off between growth and profitability; you can’t easily grow revenue, profits, and market share at the same time, Mallik explained. Same-segment M&As help solve this by locking in market share and enabling more sustainable profit growth. Several deals, such as acquistions of Ecom Express, Pickrr, RenewBuy and Design Café, reflect this pattern and make their segments more sustainable, he added.
In categories with large captive user bases, he said, acquisitions also offer a faster route to scale compared to the slower and more uncertain process of building a new line internally. And as companies move into newer segments, this “buy over build" approach will only accelerate, according to Mallik.
Speed checks
Agrawal, however, pointed out that the strategy is not risk-proof. “The biggest risk isn’t the transaction, it’s post-merger integration."
He explained that the cultural alignment, tech stack merging, regulatory exposure (especially in fintech), and overestimated synergies can erode deal value.
Mallik also said in industries where Indian players compete with very large and capable global leaders, it is very difficult to create competitiveness via M&A alone. In such cases, true business model innovation is the only way to gain customers and market share.
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