M&A
In response, Zo Room has said that Oyo is acting in bad faith by terminating all discussions and that it will take all steps to protect its interests

Over a year after reports of Oyo acquiring rival Zo Rooms, the former has called off the deal. In a statement from the company, it said that it had explored a potential acquisition of Zo Rooms back in late-2015.

However, the non-binding term sheet for the deal was terminated in September 2016.

“Following this, we tried to identify potential value in their business but could not reach an outcome. We can now confirm that OYO has ended all discussions on the matter,” the company said in a statement.

In response to this, Zo Room has said that Oyo is acting in bad faith by terminating all discussions and that it will take all steps to protect its interests.

"As a matter of clarification, Zo states that OYO is resiling from the contractual terms after acquiring the entire ZO Rooms business by March 2016. This is not an act in good faith and Zo takes a very serious view of the matter and will take all steps to protect its interests and enforce its rights," Zo Rooms said in a statement. 

In December 2015, Economic Times reported that Oyo was looking to acquire Zo Rooms in an all-stock deal where all the founders of Zo Rooms would exit the company post the deal and the founders and investors would get 7% stake in Oyo.

Zo Rooms is one of the brands of Zostel Hospitality, which also runs Zostel. It was founded in 2013 by Dharamveer Chouhan, Akhil Malik, Paavan Nanda, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu.

While it initially opened and ran hostels across popular tourist destinations such as Jaipur, Gokarna, Udaipur, it entered into the budget hotel space with Zo Rooms in December 2014. By late-2015, it expanded to 51 cities in India.

As per an Inc42 report, Zo’s existing investors were not keen on extending investments with Zo Rooms because of which the company was looking at other means.

Reports of the deal facing hurdles surfaced within days. Following this, Zo Rooms pulled down its website around February 2016, which strengthened rumours of the merger.

Inc42 had reported that the two parties had confirmed stating that the deal was nearly closed. In fact Oyo’s investor SoftBank  also made a disclosure in its earnings report about the OYO and Zo deal.

However, in March last year, Times of India reported that the all-stock deal may not go through as both parties were unable to agree on terms. 

OYO recently raised $250 million (over Rs1,600 crore) in a fresh round of funding led by SoftBank Vision Fund, Sequoia India, Lightspeed Venture Partners and Greenoaks Capital and Hero Enterprise.

With this round, Oyo has become the dominant player in India’s online hospitality space, while most of the smaller rivals shut shop.