Merger and Acquisition take place with the sole objective of increasing the efficiency and profitability of the company. The circumstances that lead to the decision of merger and Acquisition varies from the bankruptcy of the company to simply expanding the business of the company. The decision of merging a company is more significant than Acquisition as, after the merger, the existence and the individuality of the company come to an end, whereas in Acquisition, the change occurs in the control of the company. The foremost advantage for a company going for Acquisition is that it facilitates in overcoming market barriers and helps in gaining a competitive superiority in the market, and helps in achieving market synergies. The perfect example for understanding the notion of Acquisition and its advantages is from studying the case of Byju’s.
Byju Raveendran is the founder of the Bangalore based Educational Technology firm that emerged in the year 2015 and has now become India’s most valuable unicorn start-up with an estimated value of 16.5 billion dollars. According to sources, Byju’s is targeting US-based kids coding Start-up Tynker as its ninth Acquisition of the year. A start-up that had only 3.00,000 active users in the year 2016 is now acquiring its major competitors, spending worth 2 billion dollars in only just six months.
The sudden entry of Covid-19 was disturbing, and all the transactions and business was slowed down. But the opportunity for the educational technology company increased immensely as everything was operated virtually. This came as an opportunity for Byju’s, and it simply went for acquisitions of the company who were on the disadvantageous side of the Covid effect or the advantageous side of Covid.
Observing the timeline and growth of the start-up, Byju’s had the approach of expanding its business through Acquisition and in the year 2017, Byju’s acquired Vidyartha, Tutor Visa and Edurite, online tutoring platforms that significantly increased the resources and services of Byju’s. In the year 2019, Byju’s Acquisition of Palo Alto-based educational games maker Osmo, it’s first in the USA, bolstered Byju’s computer vision technology capabilities, which has helped the company create a more hands-on learning experience on its platform. In July 2020, BYJU’S acquired WhiteHat Jr. for $300 million, which teaches online coding to students through live lessons and interactive classes.
The Acquisition has led to the consummation of the other major competitors in the educational market. The Singapore based company, Great Learning was acquired by Byju’s for 600 million dollars on Monday, and the educational-technology major will invest an additional 400 million dollars in strengthening its position in the professional and higher education segment. Another competitor of Byju’s, Toppr, was further acquired for 150 million dollars. To expand its connections and strongly establish its base in the U.S.A, Byju’s acquired US-based kids digital reading platform Epic in a $500 million deal. This deal will get Byju’s access to Epic’s rich global user base that is said to have doubled over the last year, and major now comprises more than 2 million teachers and 50 million kids.
In other recent deals, the company took over the country’s largest brick and mortar tutoring institute, the 33-year-old Aakash Educational Services Limited (AESL), which provides reparatory services to students appearing for medical and engineering entrance exams, school/board exams, KVPY, NTSE, Olympiads and other foundation level exams, was acquired at the cost of nearly one billion dollars.
The most significant essence of Acquisition is the concept of control. In the case of an acquisition, there is a game of power of control, i.e. the acquiring company purchases the assets or the majority shares of the target company that automatically gives the acquiring company the control. Both the companies do not lose their existence and function independently. This is beneficial for both the companies in terms of financial and economic terms as they increase the resources, funds and services without any major changes in their functionality and operations. Similarly, in the acquisitions of Byju’s, the companies will continue to operate independently. Great Learning will continue to function under the leadership of the CEO and Founder, Mohan Lakhamraju, along with his team. Similarly, the roles of the CEO and vital office bearers in EPIC will also remain unchanged. The company will fulfil its parent’s long-term strategy of focusing on kids’ education in India and the global markets. AESL, too will also operate as an independent entity under the umbrella of Byju’s like other acquired companies in the recent past.