A New Trend in Online Education

Contents:

• Why did the mergers and acquisitions boom begin?
• What is happening in Russia?
• What does the mergers and acquisitions fever threaten companies with?
• What does it threaten consumers with?
• What to expect in 2022?

Why the M&A Boom?

Research conducted by Lincoln confirms that 2021 was a record year for the EdTech sector. In the fourth quarter, analysts recorded 54 major M&A deals, which is significantly higher than the 42 deals recorded in the same period last year. According to Berkery Noyes, the number of transactions in this area increased by 6% since 2020, rising from 433 to 457, while the total deal value increased by an impressive 41%, from $21.36 billion to $30.22 billion. These figures highlight the active development and investment attractiveness of the EdTech market, making it a key segment for further growth and innovation in the educational sector.

According to most experts at Skillbox Media, mergers and acquisitions (M&A) allow companies to expand their audience, develop new niches, enter the offline market or abroad, and gain access to competitors' technologies. M&A is becoming an important tool for strategic growth and increasing competitiveness in the market.

In 2020, the Indian company Byju's made significant acquisitions, buying nine educational services. Among them, it is worth noting the reading platform Epic, acquired for $500 million, the Toppr app designed for schoolchildren, bought for $150 million, and the student service Great Learning, which was bought for $600 million. These strategic investments strengthen Byju's position in the edtech market and highlight its commitment to expanding and improving educational services.

The trend of mergers and acquisitions (M&A) in the Indian market has been observed for several years, notes Mikhail Myagkov, founder and CEO of Maximum Education. A similar trend was observed in the Chinese market, but the process there has slowed due to strict government regulation of the EdTech sector. In 2021, Chinese authorities introduced significant restrictions on the supplementary education industry, which significantly impacted the sector's development.

In February, we covered how Chinese EdTech companies are adapting to the restrictions, six months after their introduction. These companies are finding new avenues for development by implementing innovative technologies and rethinking their educational models. A discussion of current trends and methods used by Chinese education startups provides insight into how they are overcoming challenges and continuing to grow in a changing environment.

According to a report by Raymond James, the largest number of mergers and acquisitions (M&A) deals in the United States are carried out by companies targeting schoolchildren, accounting for 45% of the total. In second place are companies working with corporate clients and students, with a share of 19% each. Companies targeting preschoolers account for 15%, and the B2C segment accounts for only 2% of the total deal volume. These figures highlight the importance of the education segment in the M&A market in the United States.

Participants in mergers and acquisitions (M&A) transactions view current events as a logical process. After a period of active financing, a stage of consolidation always begins in the market. In a liquidity crisis, large companies seek to acquire other firms. However, the current situation is different from previous ones, when small and dynamic companies became objects of interest to giants in their industry. Potential buyers could be a variety of organizations, including major publishing houses or universities, highlighting the wide range of opportunities in the M&A market, according to an analytical report from Smart Ranking available to Skillbox Media.

Olga Gelmel, Head and HR BP of the EdMarket Career Center, notes that Russia is seeing a stronger trend toward mergers and acquisitions compared to other countries. This process actively impacts the labor market and requires specialists to be flexible and adapt to new conditions. Mergers and acquisitions create new opportunities for career advancement, but can also lead to changes in corporate culture and structure. It is important to consider that successful post-merger integration requires a careful approach to human resources management, making the work of HR specialists especially relevant in today's environment.

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Many companies outside their home country view growth opportunities not so much through expanding their business scale, but rather through entering new markets, such as Europe, the United States, Asia, and others. This is a strategic approach that allows for risk diversification and increased competitiveness. Entering foreign markets opens up access to new consumers, innovations, and partnerships, which contributes to sustainable business development in a globalized world.

What's happening in Russia?

In 2021, Russia saw a sharp increase in consolidation, driven by the increase in the number of companies amid the pandemic. In particular, the educational technology (EdTech) market began actively preparing for an initial public offering (IPO). To successfully enter the IPO, companies needed to quickly consolidate their assets, as emphasized by Mikhail Myagkov of Skillbox Media.

Consolidation is a natural process in a developed market. As Matvey Matveyev, an expert in the field of education, notes, it is often easier to acquire existing businesses than to develop their own from scratch. This allows companies not only to accelerate growth but also to effectively utilize their existing resources and experience. As a result, consolidation is becoming an important tool for increasing competitiveness and improving market position.

In 2021, the Uchi.ru platform, owned by VK, completed the acquisition of several educational companies. Among the acquired companies were YaKlass, TutorOnline, CodeClass, and the offline schools Vash Lesson. Meanwhile, Skyeng expanded its horizons by acquiring the Codeum schools and the QMarketing service. It is also worth noting that Skillbox merged with the GeekBrains platform, demonstrating ongoing consolidation in the online education market. These mergers and acquisitions highlight the growing competition in the educational technology sector and the desire of companies to offer more diverse and high-quality educational solutions.

Several years ago, the EdTech market was dominated by small companies and startups. However, according to Olga Khasyakova, CEO of InternetUrok, most of the leading companies in this field are currently major players that came from other industries, or companies that have received investments from these major corporations. This change in the market structure indicates a significant increase in the interest of large organizations in educational technologies and their willingness to invest resources in the development of this area.

Mergers and acquisitions (M&A) are a strategic tool for rapid business growth, says Kristina Gevorkyan, Head of the Educational Department at Lectera and author of the Education Trends Telegram channel. Acquiring a startup, new technology, or a qualified team is often more profitable and less risky than creating everything from scratch, which allows you to maintain a competitive position in the market.

Competition between leading companies in Russia today is similar to the situation: "These people have English skills, so we need to master them too"; "They have programming experience, so we should do it too." In the current economic climate, companies are forced to adapt to market changes and follow trends to keep up with competitors and maintain their competitiveness.

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Olga Gelmel argues that the merger and acquisition (M&A) process represents a strategic attempt to create a holistic ecosystem. Through such deals, companies strive to cover the entire educational process of their clients, from preschool education to retraining specialists for new professions. This allows them not only to expand their services but also to provide clients with a comprehensive approach to lifelong learning.

What are the threats of mergers and acquisitions for companies?

Cost reduction, marketing integration, and unification of customer and sales systems are becoming important advantages for companies. However, differences in corporate cultures and work approaches can create certain barriers. At first glance, this may seem insignificant, but Mikhail Myagkov emphasizes that such nuances are of great importance. He believes that mergers and acquisitions (M&A) are a natural stage of market development, especially when it transitions from small startups to large players with high revenues. Matvey Matveyev also supports this opinion. Mergers and acquisitions can facilitate business growth and development, but it is important to consider cultural differences for successful integration.

Kristina Gevorkyan expresses concern about market "cannibalization", when small startups are acquired by large brands. As a result of such acquisitions, internal competition can intensify, leading to the need to cut back on part of the business that took years to build. This, in turn, leads to a reduction in the number of specialists, since their responsibilities are transferred to the teams of parent companies. It is important to consider that such a situation can negatively impact innovation and the development of the industry as a whole.

The merger and acquisition strategy is sometimes used to eliminate potentially dangerous competitors. In such cases, the company is bought out, after which its project is gradually phased out. Although such practices are considered unethical, they do occur in business.

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Small companies find it more difficult to establish themselves in a market dominated by large players. However, it is not impossible, Olga Gelmel asserts. Large online schools are unable to offer the same level of personalized attention to each student that smaller, specialized institutions can. A personalized approach and flexibility are key advantages for small online schools competing for narrow market segments.

What's in it for consumers?

The benefits of mergers and acquisitions may be less obvious to consumers than to the companies themselves, Myagkov notes. However, it's important to understand that such transactions can lead to improved service and product quality, expanded product range, and increased competitiveness in the market. As a result, customers can gain access to a wider selection of products, better service, and better prices. Furthermore, combining the resources and expertise of companies can foster innovation and the development of new technologies, which also positively impacts the consumer experience.

On the one hand, expansion of product lines and improved product quality are observed, but on the other hand, a lack of competition can negatively impact pricing. In conditions where there are not enough players in the market, prices may remain high, which does not always meet consumer expectations. Therefore, it is important to monitor the competitive environment to ensure affordable and fair prices for clients.

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Mergers and acquisitions of companies lead to the formation of monopolies in the service market, which, in turn, reduces the level of real competition. This negatively impacts consumers, as they have fewer options. Gevorkyan emphasizes the importance of maintaining competition to protect consumer rights and ensure diversity in the market.

Olga Gelmel notes that brand loyalty has its benefits. When a consumer becomes a regular customer, they gain access to special offers and discounts. This not only allows them to save on training but also opens the opportunity to participate in courses that meet a uniform quality standard. Such offers simplify the selection process and increase overall customer satisfaction.

What to expect in 2022?

Market consolidation has become one of the key trends of 2021, and experts predicted its further development in 2022. According to Daria Ryzhkova, editor and founder of the Smart Ranking agency, the main factors driving consolidation are increased competition and rising customer acquisition costs. These changes in the market environment are forcing companies to merge to increase efficiency and improve their positions.

The situation on The market has changed significantly, but transactions, albeit on a smaller scale, will still continue. The elimination of key promotion channels will lead to increased marketing costs, which will prove unaffordable for smaller companies. Furthermore, limited access to investment is forcing them to focus more on mergers and acquisitions (M&A).

Mikhail Myagkov, founder and CEO of Maximum Education, is convinced that despite the new economic realities of 2022, the current trend will continue.

The pace of development may slow slightly without an emphasis on IPOs. However, the desire to become a major player that will be significant for both the industry and the state remains a key priority.

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Reading is an important part of our lives. It enriches our inner world, expands our horizons, and promotes critical thinking. Reading books, articles, and other materials helps us acquire new knowledge and skills, as well as better understand the world around us. Regular reading improves memory and concentration, and also helps expand our vocabulary. It is important to find time for reading in your daily life to reap the maximum benefits. Research shows that reading not only provides entertainment but also helps reduce stress and improve overall well-being. To make reading more effective, choose a variety of genres and topics that interest you. Read both fiction and non-fiction to deepen your knowledge and develop critical thinking.

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