Cash rich startups to acquire their penurious competitors amidst the downturn

Economic downturn is not only the time of shutdowns but also consolidations in the form of mergers and acquisitions. Such tense times force people to join hands with their rivals in order to survive like the old saying necessity is the mother of all inventions. Many cash rich Indian startups sitting on a pile of cash especially in the edtech sector are increasingly looking to buy out their rivals.

Physicswallah has their eyes upon any potential targets in the test prep segments. They have doubled their budget allocated for acquisitions to $100 million from $50 million. Upgrad, another edtech unicorn is keen to acquire startups to boost their B2B and workforce training capabilities.

Edtech companies raised $3.1 billion in 2022 from 182 rounds, significantly lower than the $5.4 billion raised in 2021 through 331 rounds, according to Tracxn, a data platform for privately held companies.

Many edtech startups who were not able to raise fresh funding are increasingly looking at an exit, too making the atmosphere conducive for such amalgamations. However, there seems to be one impediment to it- the structure of the deal and returns. Many bigger edtech startups with mulitbillion dollars of arsenal are not doing too well either. So instead of offering cash for acquisitions they are resorting to equity swaps which the founders and investors of the target companies are not onboard with. In the current cash crunch economy, cash is the king of the hour.