Looks like Ritesh Agarwal, Oyo chief executive Officer is planning to capture the market as much as he can, even if it means buying its strongest rival Zo Room. According to news by ET, Oyo rooms is planning to buy its main rival Zo room in an all-stock deal. The news is not a big shock in context of the information about Zo Room’s inability to raise further funding to sustain its operation in India. The news is a big blow to the startups competing in the same sphere as that of these two companies.
According to the reports, 40% of the employees will be absorbed in Oyo Rooms. Zostel was founded 2 years ago with a capital of Rs20 lakh with a motto of providing air-conditioned dormitories with laundry service, TV, internet and other facilities for under Rs 500 a night to travellers smart on budget.
The Reason of acquisition:
The reason of acquisition is the fact that Zo Rooms has failed to raise any further funding from its investors. In fact the blow of this inability is so heavy that Oyo Rooms set itself up to grab Zo Room inadvertently grabbing a big market share and a large chunk of potential revenue. Zo Room hasve around a network of 11,000 rooms in 1,000 hotels across more than 50 cities and towns in India
What to learn?
Expand, but never over Expand. Take Risk but calculated one. These are the two most important lessons which the acquisition of Zo rooms teaches us. Have they had been able to forecast the growth potential, they could have gained the expected potential growth in some time more than expected one.
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