By Anil Nagar
The edtech sector has witnessed a meteoric rise over the last few years, and nowhere has this been more apparent than in India. With advancements in technology and a growing emphasis on digital learning, edtech has reshaped the educational landscape. This shift reached a peak with the tailwinds of lockdown. During 2020 and 2021, the sector experienced a period of mega-takeovers and mergers. Industry giants all saw an opportunity to strengthen their position in the market and went on a buying spree. Over the course of 2021, BYJU’s alone spent almost USD 2 billion in acquisitions – January saw the takeover of Aakash Educational Services an enormous USD 1 billion (the world’s largest edtech acquisition by a venture capital (VC)-backed company); followed a few months later by the purchases of Great Learning for USD 600 million and Toppr for USD 150 million.
In this changing market scenario, edtech companies have shifted their attention to a different set of avenues for growth. Leading companies in the space have recognised the importance of strategic acquisitions. Today, the pathway to future success lies through measured consolidation, with the ultimate aim of acquiring businesses that help strengthen core functionalities, pioneer new technologies, and target untapped segments of the market.
As the sector recalibrates for the next decade of growth, these are how a well-executed acquisition strategy can benefit the edtech sector:
Strategic Growth / Strategic Shift in EdTech Acquisitions
The edtech industry has witnessed a surge in mergers and acquisitions over the years, however, the pace has slowed in the last year. The scramble to purchase as many assets as possible has given way to a new, more measured and strategic approach to expansion through acquisition. Businesses have now adopted a more circumspect approach to inorganic growth, seeking to ensure each purchase fills a particular niche in their overall ecosystem. Some companies may be targeted to gain access to new markets or customer segments, while others are purchased to incorporate newly developed technologies or systems. Ultimately, each acquisition is now carefully considered, with the aim of improving the company’s position and driving future growth.
Resilience through Diversification and Innovation
With patents, copyrights, and trademarks secured through acquisitions, exclusive rights are attained to innovations, ensuring a competitive advantage and protecting offerings from imitation. This approach creates an opportunity to acquire resources that would otherwise need extensive R&D efforts. Additionally, integration of advanced technological capabilities such as AI-driven adaptive learning platforms or virtual reality tools enhance existing offerings and develop innovative solutions. This strategic diversification into new markets and sectors fosters sustainable growth, generates new revenue streams and reduces reliance on a single income source. Thereby enhancing resilience and competitive positioning, even in challenging economic times.
Achieving Economies of Scale
Edtech firms are now approaching acquisitions with a clear focus on streamlining operations and leveraging synergies for long-term growth and success. A successful acquisition creates synergies and operational efficiencies, resulting in a company that is greater than the sum of its parts. This drives profitability and increases its competitiveness in the marketplace. However, companies in this position must also be careful to avoid maintaining overlapping functions that act as a drain on resources. Efforts must also be made to help companies with differing values and operational approaches work together, to better leverage their unique capabilities and skills.
Building a Robust Ecosystem
Edtech companies recognise the value of building an all-encompassing ecosystem that provides comprehensive solutions to their user base. Acquiring complementary businesses helps strengthen their portfolio, expand their offerings, and enrich the overall experience they can offer. This results in the creation of an interconnected network of products and services which adds value to both customers and stakeholders. As the platform offers a wider suite of capabilities and services, it creates a sticky ecosystem and builds a loyal following that will stay with it.
Online learning is navigating a transformative phase, with mergers and acquisitions set to play a critical role in the coming years. As edtech firms continue to evolve, finding the right pace of inorganic growth will be key to unlocking their true potential and creating a future-ready business model.
(The author is Anil Nagar, Founder and CEO, Adda247, and the views expressed in this article are his own)