Sber may buy educational projects Netology and Foxford

Sber is negotiating the purchase of online schools Netology and Foxford. Participants in the EdTech market call the consolidation of educational projects around major players “expected.” Analysts estimate the transaction amount at 7 billion rubles, noting that as a result, Sber may increase its share in the Russian online education market from 1% to 7%.

Sber is negotiating the purchase of the educational platform Netology (additional and vocational education, additional education) and Foxford (school education) of Alexey Mordashov, two sources in the online education market told Kommersant. Smart Ranking analysts are also talking about the deal. Sberbank and Foxford declined to comment. In Netology, Kommersant “does not comment on potential M&A.”

In the ranking of the largest EdTech companies in Russia, which is compiled by Smart Ranking, Foxford ranks 9th in terms of revenue in 2023 with 4.3 billion rubles, Netology is 12th place with 3.1 billion rubles. In first and second places are Skillbox Holding (owned by VK) and Skyeng with 12.3 billion and 12 billion rubles. respectively. According to Smart Ranking, the total revenue of the 100 largest educational services in Russia in 2023 reached 119 billion rubles. Compared to 2022, the figure increased by 32%.

Netology was created in 2011, and in 2014 merged with the Foxford online school; in September 2014, the Netology Group educational holding was created. In 2017, 40% of the company was bought by the TalentTech IT holding, owned by Alexey Mordashov’s Severgroup, then the share increased to 85%.

In June 2023, Severgroup ceased to be the founder of TT-Holding LLC, which, according to SPARK-Interfax, owns 100% of Netology LLC and 93% of Foxford LLC (7% belongs to the co-founder of Netology Group “Alexey Polovinkin). Now the ultimate owners of TT-Holding are not disclosed. On January 30, the LLC announced changes to the Unified State Register of Legal Entities, including to the constituent documents. Severgroup did not answer Kommersant.

“We estimate the deal at approximately 5 EBITDA, or one annual revenue, that is, 7–7.5 billion rubles. Until now, Sber has not made any acquisitions in the EdTech market,” says Smart Ranking founder Daria Ryzhkova. “The deal seems logical. The company is actively developing its educational projects – these are the Business Environment business school, the Edutoria course marketplace, the corporate SberUniversity and the SberEducation platform. If the deal goes through, the bank will have 7% of the market, now it’s about 1%.”

Ms. Ryzhkova explains that in the children’s segment Sber has “only Sberclass, and in preschool education there is no strong asset.” In her opinion, TalentTech assets “close the gap; they will allow Sber’s educational division to seriously compete with other ecosystems, such as VK and Yandex.”

This could be the largest transaction on the market since the beginning of 2023, when VK bought 75% of Uchi.ru for 8.7 billion rubles. This assessment assumed that the value of the asset at that time was about 11 billion rubles, that is, almost four annual revenues, Smart Ranking notes.

A Kommersant source in the market says that the possible Sber transaction “corresponds to the trend toward consolidation.” “It is more difficult for small companies to survive; M&A deals and consolidation of projects around large players are an expected strategy. In the case of TalentTech’s educational assets, however, the driving force could be the holding company’s decision to withdraw from these projects, perhaps in order to concentrate on HRTech (technology for human resources management.— “Kommersant”),” clarifies Kommersant’s interlocutor.

“Perhaps the deal marks Sber’s re-entry into education. He took a break for several years and now intends to express himself again,” notes Maxim Spiridonov, co-founder of Netology, Foxford and the Reforma business club. “Netology and Foxford have very strong brands in the preschool and children’s segments, respectively,” emphasizes a Kommersant source in the market. “In addition, each company has formed a core of loyal customers and has already developed a tone of voice in positioning, which is also plays them.” Kommersant’s interlocutor believes that Sber will not seriously transform new assets, but will “simply take control of businesses that have been built over the years.”

Alexey Zhabin, Yulia Yurasova