Allen Institute in talks to buy Unacademy for $800 million

Allen Career Institute is reportedly in advanced discussions to acquire Unacademy, one of India’s prominent edtech platforms, for a valuation of $800 million. This figure includes $160 million in cash reserves held by Unacademy, signalling a significant decline from its 2021 valuation of $3.4 billion.

The potential acquisition, which has been under negotiation for several months, is pending approval from the Maheshwari family, who are the promoters of Allen Career Institute. Investment banks are currently working on finalizing the share swap ratio, a critical aspect of the deal. This ratio will determine how many Allen shares Unacademy shareholders will receive in exchange for their current holdings. Discussions also involve cash payouts for Unacademy’s founders and early investors.

Key players in the negotiations include Bodhi Tree, a significant investor in Allen, and Gaurav Munjal, Unacademy’s co-founder and CEO. If the deal is finalized, Unacademy’s founding team, including Munjal, Roman Saini, and Sumit Jain, is expected to exit the company. This follows the departure of Hemesh Singh, Unacademy’s Chief Technology Officer, earlier this year.

Unacademy has been grappling with financial difficulties over the past year. In July 2024, the company laid off 250 employees as part of cost-cutting measures. Several senior executives have also exited the organization, highlighting the challenges it faces in maintaining stability.

The company has drawn public scrutiny for its management decisions. Earlier this year, during a virtual town hall, Gaurav Munjal announced that there would be no employee appraisals due to the company’s underwhelming growth performance. This announcement was met with backlash, particularly because Munjal delivered the message while wearing a $400 Burberry T-shirt, which many perceived as insensitive during a period of austerity.

If completed, the Allen-Unacademy merger would mark one of the largest consolidations in India’s edtech industry. The sector has been under significant pressure, with many companies struggling to sustain their pandemic-era growth and valuations amid rising costs and reduced demand.

Allen Career Institute, a leader in test preparation services, appears poised to leverage Unacademy’s technology-driven platform to expand its digital footprint. The acquisition would combine Allen’s expertise in offline education with Unacademy’s online capabilities, creating a hybrid model to address a broader market.

For Unacademy, the merger could offer a lifeline by integrating with a financially stable partner. However, the departure of its founding team would signify a new chapter for the platform, potentially reshaping its vision and operations.

As negotiations progress, all eyes are on the Maheshwari family and key investors to approve the deal. If successful, this merger could redefine India’s edtech landscape, demonstrating the challenges and opportunities in a sector that has evolved rapidly in recent years. The consolidation underscores the importance of adaptability and financial resilience in an increasingly competitive market.