Allen Institute Plans $800 Million Unacademy Acquisition: Report

Allen Career Institute, a leader in India's test preparation industry, is in advanced negotiations to acquire Unacademy, a prominent edtech platform, for $800 million. This acquisition is reported by The Economic Times and represents a significant move within India’s fast-evolving education technology sector.

Unacademy’s Valuation Declines Amid Financial Struggles

The proposed acquisition comes at a time when Unacademy is grappling with financial challenges, struggling to maintain its 2021 valuation of $3.4 billion. The $800 million valuation now being discussed includes $160 million in Unacademy’s cash reserves, indicating a significant drop in the company’s market value.

Deal Under Scrutiny and Subject to Approval

The deal, which has been under discussion for several months, is still subject to approval from the Maheshwari family, the promoters of Allen Career Institute. Investment banks are working on determining the share swap ratio, a crucial aspect of the merger. This ratio will decide how many shares Unacademy shareholders will receive in exchange for their current shares in Unacademy.

Cash Payouts and Founder Exits Expected

In addition to the share swap, discussions are reportedly ongoing about potential cash payouts for Unacademy’s founders and early investors. Key figures involved in these discussions include Bodhi Tree, an investor in Allen, and Gaurav Munjal, co-founder of Unacademy. If the deal goes through, it is expected that the founding team of Unacademy—comprising CEO Gaurav Munjal, Roman Saini, and Sumit Jain—will exit the company. This follows the departure of Chief Technology Officer Hemesh Singh earlier this year.

Unacademy Faces Financial Challenges and Restructuring Efforts

Unacademy has been facing financial difficulties in the past year, leading the company to implement several cost-cutting measures. In July 2024, the company laid off 250 employees as part of its restructuring plans. Alongside these layoffs, several top executives have also departed, reflecting internal challenges within the organization.

Employee Backlash and Public Scrutiny

The financial strain on Unacademy has been further compounded by negative public and internal scrutiny. During a virtual town hall earlier this year, Gaurav Munjal informed employees that there would be no appraisals for the year. He attributed this to the company’s below-expected growth targets, despite the above-average performance of its employees. The announcement sparked backlash, especially since Munjal was wearing a $400 Burberry T-shirt at the time, which many viewed as an insensitive choice given the context of the news.

Impact of the Deal on the Edtech Sector

If finalized, this acquisition will mark one of the largest consolidations in India’s edtech sector. The deal highlights the growing financial pressures faced by many companies within the industry, particularly in the face of competitive challenges and the evolving demands of the market.