OYO, the network of budget hotels recently made the acquisition of Chennai-based service apartment operator Novascotia Boutique Homes, which moreover marks the company’s first major takeover and proves its dominance in the market they operate.
The deal’s negotiations begun in last October and materialized last month. Despite OYO company executives’ opting to keep the financial details of the deal confidential, the company backed by SoftBank Group is rumored to have struck the Novascotia acquisition at around $1 million.
This deal is a significant landmark for the Gurgaon-based company as it marks its first all-cash deal for a brick-and-mortar company. Previously, OYO began negotiations to acquire smaller competitor Zo Rooms, but wrote off the deal in October 2017 after finding out that the acquisition of the rival company would have no “potential value”.
Furthermore, OYO has currently made around six acqui-hires since 2016 but none has been shared with the public. Most of the deals were performed to obtain the team members of the acquired companies and were predominantly stock deals with a small cash component.
Earlier this month, OYO Chief Executive Ritesh Agarwal stated that the company was seeking to acquire additional strategic companies in India, as it constitutes its main market. In the near future, due to the rapid growth of the company, it could apply the same strategy in foreign markets.
“This, from our perspective, is the first hotel business that we are acquiring, which adds to our core business, rather than just adding to our competencies… There is one big opportunity, which is the corporate service apartments,” said the OYO CEO. With the acquisitions, OYO expects to reach their target of having 180,000 rooms coming the end of 2018 while it currently only operates around 70,000 rooms under the OYO brand.