Maheshwari Family Led Allen Institute to Acquire Unacademy for $800 Mn

Popular edtech firm Unacademy has been in extended discussions with the renowned offline test preparation centre Allen Career Institute for a potential sale that could value the company at $800 million. This news comes as a sharp decline from Unacademy's peak valuation of $3.4 billion, according to a report by The Economic Times.

The ongoing negotiations, which have been going on for several months, are contingent on final approval from Allen's promoters, the Maheshwari family. Maheshwari brothers' final approval would lead to merging Unacademy with Allen, as other stakeholders seem inclined to move forward with the deal.

Consolidation in the edtech sector

Investment banks from both sides have been involved in the discussions, and if the merger proceeds, it would mark a significant consolidation in the edtech sector. The edtech sector is going through a rough time with the post-Covid slowdown and the aftermath of Byju's bankruptcy and financial irregularities allegations. Unacademy, originally an online-only platform, has pivoted to an offline model in recent years while Allen has seen a decline in business due to issues within the Kota coaching ecosystem.

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Valuation and cash balance

The valuation being discussed for Unacademy includes its cash balance of around $160 million, which has become a point of contention between the two parties. This cash balance is being excluded from Unacademy's enterprise valuation, according to sources familiar with the talks. The share swap ratio is yet to be finalized, and negotiations are ongoing regarding potential cash payouts to Unacademy's founders and early investors.

Changes in leadership

Post-merger, Unacademy's founding team, including Gaurav Munjal, Roman Saini, and Sumit Jain, are expected to leave the company. This follows the departure of CTO Hemesh Singh earlier this year. Unacademy has been implementing cost-cutting measures, including layoffs and the exit of top executives, to restructure the company.

Incidentally, CEO Gaurav Munjal faced backlash earlier this year after announcing that employees would not receive appraisals while wearing a $400 Burberry T-shirt during the announcement.

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