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Ronnie Screwvala’s higher-skilling company UpGrad has withdrawn from talks to acquire SoftBank-backed test prep startup Unacademy, people familiar with the matter said. The discussions stalled over differences in valuation expectations.
Initially, the talks had happened for an all-stock transaction that valued Unacademy at around $300 million — an over 90% cut from its peak valuation of $3.4 billion.
“The talks were officially called off today. The two sides couldn’t align on the final valuation,” one of the persons said.
Confirming the development, Screwvala told ET, “Yes, we are not proceeding as we could not agree on the valuation of Unacademy”.
“UpGrad was valuing itself at around $2 billion, which would have implied nearly 10-15% dilution per the initial terms… this did not work for the company,” one of the people cited above said, adding that Unacademy at present has around Rs 1,000-1,100 crore of cash in the bank.
According to one of the persons briefed on the development, Screwvala had informed Unacademy’s investors about UpGrad’s intention to pull out of the talks earlier this week, after the two sides failed to come to a common ground after months of negotiations.
Unacademy founder Gaurav Munjal did not comment.
This is the second time that Unacademy — backed by the likes of Peak XV Partners, Nexus Venture Partners, Temasek, and General Atlantic — has been in failed negotiations for a potential sale. In December 2024, ET had reported that it was in talks with Kota-based Allen Career Institute for a potential acquisition that valued the company at around $800 million. Those negotiations also failed over differences in valuation.
On Monday, ET had reported that Unacademy rolled back changes to its employee stock option (Esop) policy that had significantly reduced the exercise window for former staffers.
These changes, which faced pushback from former employees, were brought in place in the context of a potential deal with UpGrad.
Given that the proposed valuation is significantly lower than the funds — more than $800 million — Unacademy has raised so far, shareholders who invested at higher valuations are entitled to invoke liquidation preference in an M&A scenario. When such preferences are enforced, the value of Esops effectively becomes zero.
Liquidation preference is a clause that states that investors get paid first when a company is sold, merged, or shut down — before founders, employees, or Esop holders get anything.
To prevent this, the company had requested the board to explore ways that would allow employees to receive shares if there is a stock deal, even if it is at a lower valuation.
Initially, the talks had happened for an all-stock transaction that valued Unacademy at around $300 million — an over 90% cut from its peak valuation of $3.4 billion.
“The talks were officially called off today. The two sides couldn’t align on the final valuation,” one of the persons said.
Confirming the development, Screwvala told ET, “Yes, we are not proceeding as we could not agree on the valuation of Unacademy”.
“UpGrad was valuing itself at around $2 billion, which would have implied nearly 10-15% dilution per the initial terms… this did not work for the company,” one of the people cited above said, adding that Unacademy at present has around Rs 1,000-1,100 crore of cash in the bank.
According to one of the persons briefed on the development, Screwvala had informed Unacademy’s investors about UpGrad’s intention to pull out of the talks earlier this week, after the two sides failed to come to a common ground after months of negotiations.
Unacademy founder Gaurav Munjal did not comment.
This is the second time that Unacademy — backed by the likes of Peak XV Partners, Nexus Venture Partners, Temasek, and General Atlantic — has been in failed negotiations for a potential sale. In December 2024, ET had reported that it was in talks with Kota-based Allen Career Institute for a potential acquisition that valued the company at around $800 million. Those negotiations also failed over differences in valuation.
On Monday, ET had reported that Unacademy rolled back changes to its employee stock option (Esop) policy that had significantly reduced the exercise window for former staffers.
These changes, which faced pushback from former employees, were brought in place in the context of a potential deal with UpGrad.
Given that the proposed valuation is significantly lower than the funds — more than $800 million — Unacademy has raised so far, shareholders who invested at higher valuations are entitled to invoke liquidation preference in an M&A scenario. When such preferences are enforced, the value of Esops effectively becomes zero.
Liquidation preference is a clause that states that investors get paid first when a company is sold, merged, or shut down — before founders, employees, or Esop holders get anything.
To prevent this, the company had requested the board to explore ways that would allow employees to receive shares if there is a stock deal, even if it is at a lower valuation.
